-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WC9pKH6aqIaDyVo+cedn0E/mDFT+nx87bjDT4uHy022hlMIssJD4uGHsPgpCtSGK 4g+wI4LMXAZ8Ii9OR6LR5Q== 0001047469-05-013981.txt : 20050509 0001047469-05-013981.hdr.sgml : 20050509 20050509164823 ACCESSION NUMBER: 0001047469-05-013981 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050228 FILED AS OF DATE: 20050509 DATE AS OF CHANGE: 20050509 EFFECTIVENESS DATE: 20050509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JP MORGAN MUTUAL FUND GROUP/MA CENTRAL INDEX KEY: 0000814078 IRS NUMBER: 134161079 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05151 FILM NUMBER: 05812387 BUSINESS ADDRESS: STREET 1: C/O J.P. MORGAN FUND DISTRIBUTORS, INC. STREET 2: 522 FIFTH AVENUE, 11TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 212-837-1968 MAIL ADDRESS: STREET 1: C/O J.P. MORGAN FUND DISTRIBUTORS, INC. STREET 2: 522 FIFTH AVENUE, 11TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: MUTUAL FUND GROUP/MA DATE OF NAME CHANGE: 20000929 FORMER COMPANY: FORMER CONFORMED NAME: VISTA FUNDS DATE OF NAME CHANGE: 19981231 FORMER COMPANY: FORMER CONFORMED NAME: MUTUAL FUND GROUP DATE OF NAME CHANGE: 19920703 N-CSRS 1 a2156996zn-csrs.txt N-CSRS ----------------------------- OMB APPROVAL ----------------------------- OMB Number: 3235-0570 Expires: November 30, 2005 Estimated average burden hours per response....... 5.0 ----------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-05151 --------------------------------------------- J.P. Morgan Mutual Fund Group - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 522 Fifth Avenue, New York, NY 10036 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Stephen M. Benham, 522 Fifth Avenue, New York, NY 10036 - ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 1-800-480-4111 ---------------------------- Date of fiscal year end: August 31, 2005 -------------------------- Date of reporting period: September 1, 2004 through February 28, 2005 ---------------------------------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. Include a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1). SEMI-ANNUAL REPORT SIX MONTHS ENDED FEBRUARY 28, 2005 JPMORGAN FUNDS INCOME FUNDS BOND FUND ENHANCED INCOME FUND EMERGING MARKETS DEBT FUND GLOBAL STRATEGIC INCOME FUND SHORT TERM BOND FUND SHORT TERM BOND FUND II [JPMORGAN ASSET MANAGEMENT LOGO] JPMORGAN ASSET MANAGEMENT is a premier global wealth manager that has been working with affluent investors for over a hundred years. This experience provides us with a keen understanding of the unique needs of the affluent investor's portfolio. The legacy of our experience, coupled with our GLOBAL INTELLECTUAL CAPITAL, is the foundation from which our investment products have been built. We have a worldwide investment presence. This local insight provides us with a global view of every investment decision we make which, we believe is crucial in light of the ever-increasing rise of globalization in our marketplace. JPMorgan Asset Management is an EXPERIENCED PARTNER dedicated to working with your financial professional to help provide you with a broad array of WEALTH SOLUTIONS. CONTENTS President's Letter 1 Fund Commentaries: Bond Fund 3 Enhanced Income Fund 6 Emerging Markets Debt Fund 9 Global Strategic Income Fund 12 Short Term Bond Fund 15 Short Term Bond Fund II 18 Portfolio of Investments 21 Financial Statements 74 Notes to Financial Statements 85 Financial Highlights 108
HIGHLIGHTS - - While U.S. economy continued to expand with increased business and consumer spending and higher GDP, international growth lagged. - - Inflation remained tame as the Fed raised short-term rates, although higher commodity prices hinted at an increased inflation rate. Investments in a Fund are not bank deposits or obligations of, or guaranteed or endorsed by, any bank and are not insured or guaranteed by the FDIC, the Federal Reserve Board or any other government agency. You could lose money if you sell when the Fund's share price is lower than when you invested. Past performance is no guarantee for future performance. The general market views expressed in this report are opinions based on current market conditions and are subject to change without notice. These views are not intended to predict the future performance of a Fund or the securities markets. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Such views are not meant as investment advice and may not be relied on as an indication of trading intent on behalf of any Fund. Prospective investors should refer to the Fund's prospectus for a discussion of the Fund's investment objective, strategies and risks. Call JPMorgan Funds Service Center at (800) 480-4111 for a prospectus containing more complete information about a Fund including management fees and other expenses. Please read it carefully before investing. JPMorgan Funds are distributed by JPMorgan Distribution Services, Inc. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds. JPMORGAN INCOME FUNDS PRESIDENT'S LETTER MARCH 7, 2005 [PHOTO OF GEORGE C.W. GATCH] "Economic data released in January and February suggested that economic growth would remain firm through the end of the first quarter. Businesses appeared likely to make a strong contribution to the economic expansion despite the expiration of some tax incentives." DEAR SHAREHOLDER: We are pleased to present this semi-annual report for the JPMorgan Fixed Income Funds for the six-month period ended February 28, 2005. Inside you'll find in-depth information on some of our fixed income funds along with an update from the portfolio management team. DESPITE SOFT SPOT, U.S. ECONOMY CONTINUES TO GROW The U.S. economy softened early in the period, largely in response to higher oil prices. However, by the fourth quarter, it had strengthened again. Driven by increased consumer and capital spending, the U.S. gross domestic product grew at 3.8%. Housing market activity, including sales, new housing starts and permits, was stronger than expected. Meanwhile, the international growth environment experienced some deterioration. Inflation was well behaved, trending near 1.5%. Economic data released in January and February suggested that economic growth would remain firm through the end of the first quarter. Businesses appeared likely to make a strong contribution to the economic expansion despite the expiration of some tax incentives. Core capital goods orders -- an important forward-looking indicator of business investment -- increased by 4.4% in January after a gain of 3.4% in December. Although the trade deficit seemed to be acting as a drag on the economy, domestic demand for goods and services was strong. The job picture continued to be mixed. While 124,000 new jobs were added to the payrolls in January, unemployment was 5.2%. FEDERAL RESERVE MAINTAINS PATTERN OF MEASURED INTEREST-RATE INCREASES Over the course of the period, the Federal Reserve Board (the Fed) maintained a steady pattern of interest-rate increases. In November and again in December, it raised short-term interest rates by a quarter of a percent. The Fed also reaffirmed its intent to raise rates at a measured pace and to "respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability." In early 2005, investors began to speculate that such a response would come sooner rather than later. Although inflation grew by a modest 1.6% in 2004, economic data released in February hinted that it could be on the rise. If companies began to pass on higher commodity prices to consumers or consumer expectations changed, the Fed might begin to tighten interest rates more aggressively. Adding to concern was the flattening yield curve. Although short-term rates had risen over the period, longer-term interest rates remained low, which was counter to the Fed's intended policy actions. However, the Fed did not drop its "measured pace" rhetoric during the period and, following a quarter-of-a percent increase in February, the fed funds rate (the rate charged by banks for overnight loans) stood at 2.50%. In this challenging environment, rest assured that your portfolio managers will continue working hard on your behalf. As they look for opportunities to obtain the highest possible yields, they will also stay focused on the preservation of your principal. On behalf of all of us here at JPMorgan Asset Management, thank you for the continued confidence and trust you have placed in us. We look forward to serving your investment needs for many years to come. Should you have any questions, please feel free to contact the JPMorgan Funds Service Center at 1-800-480-4111. Sincerely, /s/ George C.W. Gatch George C.W. Gatch President JPMorgan Funds 2 JPMORGAN BOND FUND AS OF FEBRUARY 28, 2005 (Unaudited) FUND FACTS Fund Inception 7/26/1993 Fiscal Year End AUGUST 31 Net Assets as of 2/28/2005 (In Millions) $836 Primary Benchmark LEHMAN AGGREGATE BOND INDEX Average Credit Quality AA Duration 5.1 YEARS
Q: HOW DID THE PORTFOLIO PERFORM? A: The JPMorgan Bond Fund, which seeks to provide high total return consistent with moderate risk of capital and maintenance of liquidity, returned 2.71% (Institutional Shares) for the six-month period ending February 28, 2005. This compares to the 1.26% return of its benchmark, the Lehman Aggregate Bond Index. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: Although our residential mortgage security selection enhanced performance, our mortgage sector weighting was a modest negative. Our duration and yield-curve positioning was also a positive, as was our positioning in investment-grade corporate bonds. Also adding to performance were our international positions and our allocation to securities that were below investment grade, such as high-yield and emerging markets debt. Q: HOW WAS THE PORTFOLIO MANAGED? A: The U.S. economy continued to expand following an oil-induced soft spot earlier in 2004. Business spending increased while consumer spending and the housing market remained robust. These positive developments offset deterioration in the international growth environment and the associated negative impact on net exports. Fourth-quarter gross domestic product grew at 3.8% versus 4.0% during the third quarter. Data from the first quarter of 2005 suggested that firm growth would continue. Although inflation remained tame, higher commodity prices hinted that the inflation rate could increase. In addition, the employment picture remained mixed, while unemployment fell in January to 5.2%, the lowest level in more than three years, it rose to 5.4% in February. Pledging to "respond to changes in economic prospects," the Federal Reserve Board continued to raise short-term rates at a measured pace, tightening by a quarter of a percent each in November, December, and February. By the end of the period, the fed funds rate (the rate charged by banks for overnight loans) stood at 2.50%. Short-term rates rose over the period on expectations of Fed tightening. However, rates for longer-term maturities moved lower, contributing to significant flattening of the yield curve between two- and 30-year maturities. We managed duration based on our belief that the Fed would tighten less aggressively than market expectations. Because we expected that short-term rates would rise more quickly than long-term rates, we implemented curve-flattening trades. After spreads tightened, we actively traded residential mortgages around a neutral position. Mortgage security selection focused on coupon selection. We took advantage of opportunities to purchase both asset-backed and commercial-backed securities at attractive prices. Despite strong fundamentals, we reduced the Fund's allocation to investment-grade corporate bonds, maintaining a modest overweight to attractive BBB names, European Tier 1 and Asian bank paper, telecom, insurance, and natural gas credits. We also reduced our exposure to the markets in high-yield and emerging markets debt as spreads in both tightened substantially. In the emerging markets, we focused on fundamentally strong countries. We maintained a Eurozone curve-steepener position and added an outright long Euro/short U.S. dollar position in five-year maturities. 3 [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS Residential Mortgage Backed Securities 35.9% Corporate Notes & Bonds 28.1% Asset Backed Securities 18.6% Foreign Government Securities 6.8% Money Market Fund 2.9% Private Placements 1.9% Commercial Mortgage Backed Securities 1.7% Commercial Paper 1.5% U.S. Treasury Securities 1.4% U.S. Government Agency Securities 1.0% Other (Less than 1%) 0.2%
4 SEMI-ANNUAL REPORT FEBRUARY 28 2005 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 2005
1 YEAR 3 YEARS 5 YEARS 10 YEARS --------------------------------------- CLASS A SHARES Without Sales Charge 3.70% 5.68% 7.18% 6.86% With Sales Charge* (1.01%) 4.05% 6.20% 6.37% CLASS B SHARES Without CDSC 3.04% 4.64% 6.47% 6.50% With CDSC** (1.83%) 3.73% 6.15% 6.50% CLASS C SHARES Without CDSC 2.93% 4.81% 6.58% 6.55% With CDSC*** 1.95% 4.81% 6.58% 6.55% INSTITUTIONAL SHARES 4.08% 5.71% 7.30% 7.01% SELECT SHARES 3.86% 5.53% 7.10% 6.82% ULTRA SHARES 4.09% 5.82% 7.41% 7.10%
* Sales Charge for Class A Shares is 4.50%. ** Assumes 5% CDSC (contingent deferred sales charge) for the one year period, 3% CDSC for the three year period, a 2% CDSC for the five year period and 0% for the ten year period. *** Assumes 1% CDSC for the one year period and 0% thereafter. [CHART] TEN-YEAR PERFORMANCE (2/28/95 TO 2/28/05)
JPMORGAN BOND FUND LEHMAN AGGREGATE LIPPER INTERMEDIATE INVESTMENT (INSTITUTIONAL SHARES) BOND INDEX GRADE DEBT FUNDS INDEX 2/28/1995 $ 3,000,000 $ 3,000,000 $ 3,000,000 3/31/1995 $ 3,024,000 $ 3,018,300 $ 3,019,800 4/30/1995 $ 3,067,243 $ 3,060,556 $ 3,059,359 5/31/1995 $ 3,194,534 $ 3,179,000 $ 3,166,743 6/30/1995 $ 3,214,659 $ 3,202,206 $ 3,186,693 7/31/1995 $ 3,202,444 $ 3,195,162 $ 3,179,683 8/31/1995 $ 3,242,474 $ 3,233,823 $ 3,216,885 9/30/1995 $ 3,275,872 $ 3,265,191 $ 3,247,445 10/31/1995 $ 3,323,372 $ 3,307,639 $ 3,289,987 11/30/1995 $ 3,370,231 $ 3,357,253 $ 3,339,008 12/31/1995 $ 3,416,404 $ 3,404,255 $ 3,383,750 1/31/1996 $ 3,439,977 $ 3,426,723 $ 3,406,083 2/29/1996 $ 3,375,305 $ 3,367,098 $ 3,346,817 3/31/1996 $ 3,355,391 $ 3,343,528 $ 3,323,724 4/30/1996 $ 3,331,903 $ 3,324,804 $ 3,304,447 5/31/1996 $ 3,322,574 $ 3,318,155 $ 3,299,490 6/30/1996 $ 3,364,438 $ 3,362,618 $ 3,337,764 7/31/1996 $ 3,368,476 $ 3,371,697 $ 3,347,110 8/31/1996 $ 3,365,107 $ 3,365,965 $ 3,343,763 9/30/1996 $ 3,421,304 $ 3,424,533 $ 3,399,604 10/31/1996 $ 3,496,573 $ 3,500,558 $ 3,471,335 11/30/1996 $ 3,550,420 $ 3,560,417 $ 3,531,389 12/31/1996 $ 3,528,763 $ 3,527,305 $ 3,499,960 1/31/1997 $ 3,544,289 $ 3,538,240 $ 3,510,810 2/28/1997 $ 3,555,985 $ 3,547,086 $ 3,519,587 3/31/1997 $ 3,516,514 $ 3,507,713 $ 3,481,927 4/30/1997 $ 3,565,394 $ 3,560,329 $ 3,529,630 5/31/1997 $ 3,599,978 $ 3,594,152 $ 3,561,043 6/30/1997 $ 3,645,698 $ 3,636,922 $ 3,603,064 7/31/1997 $ 3,740,486 $ 3,735,119 $ 3,698,545 8/31/1997 $ 3,708,692 $ 3,703,371 $ 3,664,888 9/30/1997 $ 3,763,209 $ 3,758,180 $ 3,717,662 10/31/1997 $ 3,803,099 $ 3,812,674 $ 3,762,274 11/30/1997 $ 3,816,791 $ 3,830,212 $ 3,773,185 12/31/1997 $ 3,856,103 $ 3,868,897 $ 3,807,521 1/31/1998 $ 3,900,449 $ 3,918,419 $ 3,858,161 2/28/1998 $ 3,902,009 $ 3,915,285 $ 3,852,760 3/31/1998 $ 3,923,080 $ 3,928,597 $ 3,867,015 4/30/1998 $ 3,940,341 $ 3,949,025 $ 3,885,190 5/31/1998 $ 3,977,380 $ 3,986,541 $ 3,920,156 6/30/1998 $ 4,005,620 $ 4,020,427 $ 3,951,518 7/31/1998 $ 4,013,631 $ 4,028,870 $ 3,959,421 8/31/1998 $ 4,058,182 $ 4,094,540 $ 4,012,873 9/30/1998 $ 4,147,057 $ 4,190,352 $ 4,102,761 10/31/1998 $ 4,114,710 $ 4,168,143 $ 4,069,529 11/30/1998 $ 4,135,283 $ 4,191,902 $ 4,089,877 12/31/1998 $ 4,147,275 $ 4,204,478 $ 4,107,463 1/31/1999 $ 4,171,744 $ 4,234,329 $ 4,132,929 2/28/1999 $ 4,095,401 $ 4,160,229 $ 4,059,363 3/31/1999 $ 4,132,670 $ 4,183,110 $ 4,091,432 4/30/1999 $ 4,153,333 $ 4,196,496 $ 4,105,343 5/31/1999 $ 4,101,832 $ 4,159,567 $ 4,063,469 6/30/1999 $ 4,074,759 $ 4,146,256 $ 4,049,653 7/31/1999 $ 4,060,498 $ 4,128,842 $ 4,035,479 8/31/1999 $ 4,053,595 $ 4,126,777 $ 4,031,040 9/30/1999 $ 4,090,483 $ 4,174,648 $ 4,075,381 10/31/1999 $ 4,115,435 $ 4,190,094 $ 4,081,494 11/30/1999 $ 4,127,781 $ 4,189,675 $ 4,086,392 12/31/1999 $ 4,123,653 $ 4,169,565 $ 4,067,595 1/31/2000 $ 4,106,334 $ 4,155,805 $ 4,052,951 2/29/2000 $ 4,154,789 $ 4,206,090 $ 4,097,129 3/31/2000 $ 4,204,231 $ 4,261,611 $ 4,147,523 4/30/2000 $ 4,176,483 $ 4,249,252 $ 4,121,809 5/31/2000 $ 4,167,294 $ 4,247,127 $ 4,114,389 6/30/2000 $ 4,248,557 $ 4,335,468 $ 4,201,614 7/31/2000 $ 4,271,924 $ 4,374,920 $ 4,237,328 8/31/2000 $ 4,345,828 $ 4,438,357 $ 4,296,227 9/30/2000 $ 4,373,207 $ 4,466,318 $ 4,324,582 10/31/2000 $ 4,396,385 $ 4,495,796 $ 4,339,718 11/30/2000 $ 4,470,684 $ 4,569,527 $ 4,408,720 12/31/2000 $ 4,574,850 $ 4,654,520 $ 4,497,776 1/31/2001 $ 4,661,315 $ 4,730,389 $ 4,576,937 2/28/2001 $ 4,694,877 $ 4,771,544 $ 4,620,875 3/31/2001 $ 4,706,144 $ 4,795,401 $ 4,638,897 4/30/2001 $ 4,663,318 $ 4,775,261 $ 4,613,847 5/31/2001 $ 4,696,894 $ 4,803,912 $ 4,642,453 6/30/2001 $ 4,709,576 $ 4,822,167 $ 4,659,630 7/31/2001 $ 4,800,000 $ 4,930,184 $ 4,772,859 8/31/2001 $ 4,856,160 $ 4,986,881 $ 4,825,360 9/30/2001 $ 4,872,185 $ 5,044,728 $ 4,862,515 10/31/2001 $ 4,987,169 $ 5,150,163 $ 4,961,711 11/30/2001 $ 4,927,821 $ 5,079,091 $ 4,899,193 12/31/2001 $ 4,908,110 $ 5,046,585 $ 4,867,838 1/31/2002 $ 4,956,210 $ 5,087,462 $ 4,902,887 2/28/2002 $ 5,001,807 $ 5,136,811 $ 4,950,445 3/31/2002 $ 4,937,283 $ 5,051,540 $ 4,864,307 4/30/2002 $ 5,015,292 $ 5,149,539 $ 4,951,864 5/31/2002 $ 5,042,877 $ 5,193,310 $ 4,992,470 6/30/2002 $ 5,048,424 $ 5,238,492 $ 4,989,474 7/31/2002 $ 5,074,676 $ 5,301,878 $ 5,009,432 8/31/2002 $ 5,172,617 $ 5,391,480 $ 5,106,114 9/30/2002 $ 5,243,999 $ 5,478,822 $ 5,161,771 10/31/2002 $ 5,217,254 $ 5,453,619 $ 5,142,156 11/30/2002 $ 5,239,167 $ 5,451,983 $ 5,166,838 12/31/2002 $ 5,343,426 $ 5,564,839 $ 5,272,242 1/31/2003 $ 5,357,319 $ 5,569,847 $ 5,288,586 2/28/2003 $ 5,435,000 $ 5,646,711 $ 5,364,213 3/31/2003 $ 5,429,022 $ 5,642,194 $ 5,364,749 4/30/2003 $ 5,496,885 $ 5,689,024 $ 5,427,517 5/31/2003 $ 5,591,431 $ 5,794,840 $ 5,528,469 6/30/2003 $ 5,584,721 $ 5,783,250 $ 5,527,363 7/31/2003 $ 5,337,877 $ 5,588,933 $ 5,341,091 8/31/2003 $ 5,379,512 $ 5,625,820 $ 5,381,683 9/30/2003 $ 5,542,511 $ 5,774,904 $ 5,526,450 10/31/2003 $ 5,479,327 $ 5,721,198 $ 5,485,555 11/30/2003 $ 5,506,175 $ 5,734,929 $ 5,499,817 12/31/2003 $ 5,578,306 $ 5,793,425 $ 5,555,915 1/31/2004 $ 5,627,953 $ 5,839,772 $ 5,600,362 2/29/2004 $ 5,678,042 $ 5,902,842 $ 5,654,686 3/31/2004 $ 5,729,144 $ 5,947,113 $ 5,695,400 4/30/2004 $ 5,580,187 $ 5,792,488 $ 5,558,710 5/31/2004 $ 5,538,893 $ 5,769,318 $ 5,531,472 6/30/2004 $ 5,566,034 $ 5,801,626 $ 5,557,470 7/31/2004 $ 5,622,807 $ 5,859,063 $ 5,609,711 8/31/2004 $ 5,754,381 $ 5,970,971 $ 5,710,685 9/30/2004 $ 5,782,578 $ 5,987,092 $ 5,725,533 10/31/2004 $ 5,839,825 $ 6,037,384 $ 5,770,765 11/30/2004 $ 5,803,618 $ 5,989,085 $ 5,734,409 12/31/2004 $ 5,868,038 $ 6,044,184 $ 5,794,047 1/31/2005 $ 5,903,833 $ 6,082,263 $ 5,825,335 2/28/2005 $ 5,909,394 $ 6,046,377 $ 5,800,868
SOURCE: LIPPER, INC. THE PERFORMANCE QUOTED IS PAST PERFORMANCE AND IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. FOR UP-TO-DATE MONTH-END PERFORMANCE INFORMATION PLEASE CALL 1-800-480-4111. The Fund commenced operations on 7/26/93. Returns for the Institutional Shares prior to 9/10/01 (offering date of the Institutional Shares) are calculated using the historical expenses of the J.P. Morgan Institutional Bond Fund, which are similar to the expenses of the Institutional Shares. Returns for the Select Shares prior to 9/10/01 (offering date of the Select Shares) are calculated using the historical expenses of the J.P. Morgan Bond Fund, which are similar to the expenses of the Select Shares. Returns for the Ultra Shares prior to 9/10/01 (offering date of the Ultra Shares) are calculated using the historical expenses of the J.P. Morgan Institutional Bond Fund-Ultra, which are lower than the expenses of the Ultra Shares. Returns for the Class A and B Shares prior to 9/10/01 (offering date of the Class A and B Shares) are calculated using the historical expenses of the J.P. Morgan Bond Fund, which are lower than the expenses of the Class A and B Shares. Returns for the Class C Shares prior to 3/31/03 (offering date of the Class C Shares) are calculated using the historical expenses of the Select Shares, which are lower than the expenses of the Class C Shares. The graph illustrates comparative performance for $3,000,000 invested in Institutional Shares of the JPMorgan Bond Fund, Lehman Aggregate Bond Index, and Lipper Intermediate Investment Grade Debt Funds Index from February 28, 1995 to February 28, 2005. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman Aggregate Bond Index is composed of the Lehman Gov't/Credit Index and the Mortgage-Backed Securities Index and includes U.S. treasury issues, agency issues, corporate bond issues and mortgage backed securities. The Lipper Intermediate Investment Grade Debt Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Institutional Shares have a $3,000,000 minimum initial investment and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 5 JPMORGAN ENHANCED INCOME FUND AS OF FEBRUARY 28, 2005 (Unaudited) FUND FACTS Fund Inception 11/30/2001 Fiscal Year End AUGUST 31 Net Assets as of 2/28/2005 (In Millions) $208 Primary Benchmark 3 MONTH LIBOR INDEX Average Credit Quality AA- Duration 0.4 YEARS
Q: HOW DID THE PORTFOLIO PERFORM? A: The JPMorgan Enhanced Income Fund, which seeks high current income consistent with principal preservation, returned 1.03% (Institutional Shares) for the six-month period ended February 28, 2005. This compares to the 1.05% return of its benchmark, the 3 Month LIBOR Index. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: Contributing significantly to performance were our allocations to collateralized mortgage obligations (CMOs) and asset-backed securities (ABS). Our duration positioning detracted slightly from performance when interest rates rose sharply during the fourth quarter. Selective purchases of corporate securities added to performance as spreads continued to tighten. Q: HOW WAS THE PORTFOLIO MANAGED? A: The U.S. economy continued to expand following an oil-induced soft spot earlier in 2004. Business spending increased while consumer spending and the housing market remained robust. These positive developments offset deterioration in the international growth environment and the associated negative impact on net exports. Fourth-quarter gross domestic product grew at 3.8% versus 4.0% during the third quarter. Data from the first quarter of 2005 suggested that firm growth would continue. Although inflation remained tame, higher commodity prices hinted that the inflation rate could increase. In addition, the employment picture remained mixed, while unemployment fell in January to 5.2%, the lowest level in more than three years, it rose to 5.4% in February. Pledging to "respond to changes in economic prospects," the Federal Reserve Board continued to raise short-term rates at a measured pace, tightening by a quarter of a percent each in November, December, and February. By the end of the period, the fed funds rate (the rate charged by banks for overnight loans) stood at 2.50%. Short-term rates rose over the period on expectations of Fed tightening. However, rates for longer-term maturities moved lower, contributing to significant flattening of the yield curve between two- and 30-year maturities. We continued to selectively add corporate bonds and ABS. Early in the period, we sold high-quality, fixed-rate corporate issues in the one- to three-year area of the curve and purchased lower credit-quality names. As interest rates declined early in the fourth quarter, we reduced our duration position. We extended again after the strong October employment report. Since late 2004, we maintained a neutral position, tactically trading duration as the market reacted to economic data. Later in the period, we purchased floating-rate CMOs at attractive prices. We also added floating-rate, home equity loan ABS because they offered yields that would increase as interest rates increased. We maintained our allocation to corporate securities, but have swapped out of more expensive issues into those with higher yields. 6 [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS Corporate Notes & Bonds 45.1% Asset Backed Securities 28.4% Residential Mortgage Backed Securities 15.7% Commercial Mortgage Backed Securities 4.2% Certificates of Deposit 2.2% Money Market Fund 1.8% Other (Less than 1%) 2.6%
7 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 2005
SINCE INCEPTION 1 YEAR 3 YEARS (11/30/01) ---------------------------------------------- INSTITUTIONAL SHARES 1.69% 1.52% 1.55%
[CHART] LIFE OF FUND PERFORMANCE (11/30/01 TO 2/28/05)
JPMORGAN ENHANCED INCOME FUND (INSTITUTIONAL SHARES) 3 MONTH LIBOR INDEX 11/30/2001 $ 3,014,422 $ 3,014,724 3/31/2002 $ 3,020,451 $ 3,019,547 4/30/2002 $ 3,032,231 $ 3,024,681 5/31/2002 $ 3,037,992 $ 3,029,520 6/30/2002 $ 3,043,764 $ 3,034,367 7/31/2002 $ 3,044,069 $ 3,039,222 8/31/2002 $ 3,047,722 $ 3,044,085 9/30/2002 $ 3,051,684 $ 3,048,651 10/31/2002 $ 3,055,651 $ 3,053,529 11/30/2002 $ 3,061,762 $ 3,058,415 12/31/2002 $ 3,061,150 $ 3,062,391 1/31/2003 $ 3,069,415 $ 3,066,066 2/28/2003 $ 3,071,256 $ 3,069,132 3/31/2003 $ 3,074,635 $ 3,072,815 4/30/2003 $ 3,081,092 $ 3,075,887 5/31/2003 $ 3,090,643 $ 3,079,271 6/30/2003 $ 3,090,334 $ 3,082,966 7/31/2003 $ 3,073,955 $ 3,086,049 8/31/2003 $ 3,082,255 $ 3,088,826 9/30/2003 $ 3,089,960 $ 3,091,606 10/31/2003 $ 3,084,399 $ 3,094,698 11/30/2003 $ 3,087,791 $ 3,097,793 12/31/2003 $ 3,091,497 $ 3,100,890 1/31/2004 $ 3,095,206 $ 3,103,991 2/29/2004 $ 3,101,706 $ 3,106,785 3/31/2004 $ 3,105,118 $ 3,109,892 4/30/2004 $ 3,105,429 $ 3,112,691 5/31/2004 $ 3,106,050 $ 3,115,803 6/30/2004 $ 3,109,777 $ 3,118,607 7/31/2004 $ 3,114,131 $ 3,122,662 8/31/2004 $ 3,121,639 $ 3,126,721 9/30/2004 $ 3,126,599 $ 3,130,786 10/31/2004 $ 3,128,788 $ 3,135,795 11/30/2004 $ 3,134,107 $ 3,140,812 12/31/2004 $ 3,140,375 $ 3,146,780 1/31/2005 $ 3,146,656 $ 3,147,409 2/28/2005 $ 3,153,876 $ 3,148,039
SOURCE: LIPPER, INC. THE PERFORMANCE QUOTED IS PAST PERFORMANCE AND IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. FOR UP-TO-DATE MONTH-END PERFORMANCE INFORMATION PLEASE CALL 1-800-480-4111. The Fund commenced operations on 11/30/01. The graph illustrates comparative performance for $3,000,000 invested in Institutional Shares of the JPMorgan Enhanced Income Fund and 3 Month LIBOR Index from November 30, 2001 to February 28, 2005. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of securities included in the benchmark. The 3 Month LIBOR Index is an abbreviation for the "London Interbank Offered Rate". Similarly to the Fed Funds Rate, it represents the rate at which banks are willing to loan each other reserves. The LIBOR is an average of the rate charged on dollar-denominated deposits traded between banks in London. The benchmark presented is the total return of the 3 Month LIBOR for the period presented. Institutional Shares have a $3,000,000 minimum initial investment and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 8 JPMORGAN EMERGING MARKETS DEBT FUND AS OF FEBRUARY 28, 2005 (Unaudited) FUND FACTS Fund Inception 4/17/1997 Fiscal Year End AUGUST 31 Net Assets as of 2/28/2005 (In Millions) $37 Primary Benchmark EMERGING MARKETS BOND INDEX GLOBAL Average Credit Quality BBB Duration 5.8 YEARS
Q: HOW DID THE PORTFOLIO PERFORM? A: JPMorgan Emerging Markets Debt Fund, which seeks to provide high total return from a portfolio of fixed-income securities of emerging markets issuers, had a total return of 11.32% (Select Shares) for the six-month period ended February 28, 2005. This compares to the 8.03% return from the Emerging Markets Bond Index Global. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: The majority of our outperformance came from allocations to Argentina, Venezuela, Mexico and Russia. In Argentina, we held Bodens, an interest-bearing bond that rallied strongly as the country's debt restructuring moved closer to a resolution. Venezuela benefited as oil prices continued to rise. In Mexico, our position in long-duration bonds enhanced performance and, in Russia, the Fund benefited from our switch to higher-yield bonds. Also contributing was the credit upgrade given to both countries by the rating agencies. Our underperformance was limited to Ecuador, where we were underweight during a market rally. The Fund positioned into the local currency debt markets of Mexico, Colombia and Uruguay. Local yields in these markets have been very high and the positions also performed well as the U.S. dollar continued to weaken during the period. Q: HOW WAS THE PORTFOLIO MANAGED? A: Strong fundamentals, improved credit quality, and sustained inflows supported an ongoing rally in emerging markets debt. Economic indicators suggested that the global economy grew at a medium pace while inflation was well contained. As investors sought higher-yielding investments, prices moved up in both high-yield and emerging markets debt. New issuance continued to be ahead of schedule after several countries pre-financed their 2005 and, in some cases their 2006, funding needs. The environment became more turbulent in January on concerns that the U.S. Federal Reserve Board would raise short-term interest rates more aggressively. Driven by strong demand, the market recovered in February despite the rise in U.S. interest rates, which was sparked by growing signs of inflation. Oil prices climbed to above $50 a barrel with prospects for strong global growth in the future. We overweighted Russian debt in the face of strong buyer interest and in anticipation of a credit upgrade. As the recovery continued in Ukraine, we added to our exposure. Once prices rose beyond our estimates of fair value, we reduced our position and shifted our allocations into Peru, where we expect an upgrade in the near future. We decreased our exposure to Colombia and eliminated holdings in the Philippines. We took profits in Brazil as prices rose. We also increased our allocation to Venezuela because it should continue to benefit from high oil prices, and also remains cheap relative to its fundamentals. After reducing Ecuador early in the period, we returned to neutral because of the possibility of a credit upgrade. We invested in more liquid and short-dated securities to give us the flexibility to exit positions should the environment deteriorate. 9 [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS Foreign Government Securities 93.9% U.S. Treasury Securities 4.2% Corporate Notes & Bonds 1.8% Other (Less than 1%) 0.1%
10 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 2005
SINCE INCEPTION 1 YEAR 3 YEARS 5 YEARS (4/17/97) -------------------------------------------------- SELECT SHARES 15.84% 16.38% 13.64% 10.95%
[CHART] LIFE OF FUND PERFORMANCE (4/17/97 TO 2/28/05)
JPMORGAN EMERGING MARKETS EMERGING MARKETS BOND LIPPER EMERGING MARKETS DEBT FUND (SELECT SHARES) INDEX GLOBAL DEBT FUNDS INDEX 4/17/1997 $ 1,000,000 $ 1,000,000 $ 1,000,000 4/30/1997 $ 1,020,000 $ 1,000,000 $ 1,000,000 5/31/1997 $ 1,051,008 $ 1,033,900 $ 1,041,100 6/30/1997 $ 1,068,034 $ 1,056,542 $ 1,073,686 7/31/1997 $ 1,090,036 $ 1,100,178 $ 1,119,855 8/31/1997 $ 1,078,917 $ 1,094,787 $ 1,116,047 9/30/1997 $ 1,105,783 $ 1,125,222 $ 1,151,426 10/31/1997 $ 986,026 $ 1,005,948 $ 1,027,878 11/30/1997 $ 1,034,835 $ 1,048,601 $ 1,067,246 12/31/1997 $ 1,053,462 $ 1,074,291 $ 1,099,050 1/31/1998 $ 1,051,144 $ 1,079,448 $ 1,096,742 2/28/1998 $ 1,080,891 $ 1,107,945 $ 1,127,122 3/31/1998 $ 1,107,373 $ 1,133,096 $ 1,156,427 4/30/1998 $ 1,108,481 $ 1,135,702 $ 1,157,121 5/31/1998 $ 1,072,455 $ 1,101,404 $ 1,110,026 6/30/1998 $ 1,033,310 $ 1,073,538 $ 1,065,070 7/31/1998 $ 1,045,090 $ 1,079,765 $ 1,073,590 8/31/1998 $ 763,229 $ 784,557 $ 701,591 9/30/1998 $ 808,794 $ 852,343 $ 732,952 10/31/1998 $ 862,417 $ 906,807 $ 778,395 11/30/1998 $ 914,162 $ 969,014 $ 849,152 12/31/1998 $ 885,640 $ 950,312 $ 817,478 1/31/1999 $ 846,141 $ 928,645 $ 793,853 2/28/1999 $ 855,702 $ 937,839 $ 807,428 3/31/1999 $ 920,650 $ 1,000,018 $ 860,718 4/30/1999 $ 1,000,286 $ 1,061,519 $ 922,518 5/31/1999 $ 930,566 $ 1,006,744 $ 872,148 6/30/1999 $ 974,954 $ 1,045,403 $ 907,819 7/31/1999 $ 949,995 $ 1,027,945 $ 894,293 8/31/1999 $ 944,675 $ 1,028,665 $ 893,309 9/30/1999 $ 977,267 $ 1,060,965 $ 915,374 10/31/1999 $ 1,019,582 $ 1,098,523 $ 953,636 11/30/1999 $ 1,050,782 $ 1,127,963 $ 992,259 12/31/1999 $ 1,115,615 $ 1,180,188 $ 1,044,551 1/31/2000 $ 1,104,459 $ 1,162,013 $ 1,035,359 2/29/2000 $ 1,194,803 $ 1,224,413 $ 1,101,829 3/31/2000 $ 1,237,816 $ 1,257,717 $ 1,128,713 4/30/2000 $ 1,206,376 $ 1,234,575 $ 1,099,818 5/31/2000 $ 1,163,429 $ 1,206,056 $ 1,067,264 6/30/2000 $ 1,229,744 $ 1,262,259 $ 1,124,255 7/31/2000 $ 1,274,015 $ 1,298,233 $ 1,157,421 8/31/2000 $ 1,311,853 $ 1,339,647 $ 1,192,491 9/30/2000 $ 1,281,681 $ 1,325,178 $ 1,171,384 10/31/2000 $ 1,254,381 $ 1,298,277 $ 1,142,099 11/30/2000 $ 1,232,931 $ 1,293,084 $ 1,134,219 12/31/2000 $ 1,285,330 $ 1,350,239 $ 1,179,928 1/31/2001 $ 1,353,324 $ 1,415,320 $ 1,244,588 2/28/2001 $ 1,332,754 $ 1,396,496 $ 1,230,399 3/31/2001 $ 1,305,966 $ 1,380,856 $ 1,209,975 4/30/2001 $ 1,295,257 $ 1,374,227 $ 1,201,989 5/31/2001 $ 1,333,078 $ 1,407,346 $ 1,234,803 6/30/2001 $ 1,361,073 $ 1,428,879 $ 1,256,536 7/31/2001 $ 1,272,059 $ 1,354,863 $ 1,203,636 8/31/2001 $ 1,332,354 $ 1,415,561 $ 1,245,642 9/30/2001 $ 1,270,933 $ 1,369,272 $ 1,186,101 10/31/2001 $ 1,278,685 $ 1,369,956 $ 1,201,164 11/30/2001 $ 1,307,072 $ 1,352,421 $ 1,239,121 12/31/2001 $ 1,346,807 $ 1,368,515 $ 1,271,834 1/31/2002 $ 1,379,535 $ 1,393,832 $ 1,297,143 2/28/2002 $ 1,436,509 $ 1,446,101 $ 1,343,840 3/31/2002 $ 1,444,554 $ 1,447,692 $ 1,355,801 4/30/2002 $ 1,455,966 $ 1,461,879 $ 1,371,257 5/31/2002 $ 1,438,640 $ 1,454,277 $ 1,359,875 6/30/2002 $ 1,344,984 $ 1,380,982 $ 1,268,084 7/31/2002 $ 1,263,344 $ 1,318,423 $ 1,192,886 8/31/2002 $ 1,360,495 $ 1,414,932 $ 1,278,178 9/30/2002 $ 1,307,572 $ 1,375,738 $ 1,236,381 10/31/2002 $ 1,404,463 $ 1,460,346 $ 1,322,186 11/30/2002 $ 1,452,355 $ 1,501,820 $ 1,365,686 12/31/2002 $ 1,500,864 $ 1,547,926 $ 1,414,578 1/31/2003 $ 1,523,527 $ 1,573,467 $ 1,445,557 2/28/2003 $ 1,577,459 $ 1,623,818 $ 1,498,320 3/31/2003 $ 1,617,211 $ 1,650,123 $ 1,536,227 4/30/2003 $ 1,725,403 $ 1,744,180 $ 1,636,389 5/31/2003 $ 1,790,623 $ 1,816,564 $ 1,710,027 6/30/2003 $ 1,778,268 $ 1,816,564 $ 1,710,882 7/31/2003 $ 1,722,252 $ 1,752,258 $ 1,661,095 8/31/2003 $ 1,775,470 $ 1,794,837 $ 1,703,453 9/30/2003 $ 1,832,463 $ 1,857,836 $ 1,756,260 10/31/2003 $ 1,854,086 $ 1,866,940 $ 1,767,851 11/30/2003 $ 1,883,566 $ 1,889,903 $ 1,793,132 12/31/2003 $ 1,944,028 $ 1,945,466 $ 1,852,664 1/31/2004 $ 1,957,442 $ 1,955,388 $ 1,864,150 2/29/2004 $ 1,954,701 $ 1,962,232 $ 1,861,540 3/31/2004 $ 2,007,869 $ 2,011,092 $ 1,907,520 4/30/2004 $ 1,863,504 $ 1,901,889 $ 1,810,237 5/31/2004 $ 1,843,005 $ 1,873,741 $ 1,777,653 6/30/2004 $ 1,873,230 $ 1,901,285 $ 1,806,273 7/31/2004 $ 1,933,361 $ 1,957,753 $ 1,859,558 8/31/2004 $ 2,034,242 $ 2,038,609 $ 1,936,916 9/30/2004 $ 2,073,341 $ 2,158,071 $ 1,977,784 10/31/2004 $ 2,117,710 $ 2,223,892 $ 2,016,945 11/30/2004 $ 2,149,476 $ 2,406,696 $ 2,048,207 12/31/2004 $ 2,220,838 $ 2,531,363 $ 2,106,786 1/31/2005 $ 2,240,382 $ 2,540,476 $ 2,123,008 2/28/2005 $ 2,264,346 $ 2,752,352 $ 2,145,724
SOURCE: LIPPER, INC. THE PERFORMANCE QUOTED IS PAST PERFORMANCE AND IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. FOR UP-TO-DATE MONTH-END PERFORMANCE INFORMATION PLEASE CALL 1-800-480-4111. The Fund commenced operations on 4/17/97. The mountain chart illustrates comparative performance for $1,000,000 invested in the Select Shares of the JPMorgan Emerging Markets Debt Fund, Emerging Markets Bond Index Global and Lipper Emerging Markets Debt Funds Index from April 17, 1997 to February 28, 2005. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices reflects an initial investment at the end of the month following the Fund's inception. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Emerging Markets Bond Index Global is an unmanaged index which tracks total return for external currency-denominated debt (Brady bonds, loans, Eurobonds and U.S. dollar-denominated local market instruments) in emerging markets. The Lipper Emerging Markets Debt Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. The Select Shares have a minimum investment of $1,000,000 and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 11 JPMORGAN GLOBAL STRATEGIC INCOME FUND AS OF FEBRUARY 28, 2005 (UNAUDITED) FUND FACTS FUND INCEPTION 3/17/1997 Fiscal Year End AUGUST 31 Net Assets as of 2/28/2005 (In Millions) $46 Primary Benchmark LEHMAN AGGREGATE BOND INDEX Average Credit Quality A Duration 4.5 YEARS
Q: HOW DID THE PORTFOLIO PERFORM? A: JPMorgan Global Strategic Income Fund, which seeks to provide high total return from a portfolio of fixed income securities of foreign and domestic issuers, had a total return of 3.94% (Institutional Shares) for the six-month period ended February 28, 2005. This compares to the 1.26% return of the Lehman Aggregate Bond Index. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: The strongest contributors to performance were our holdings in high-yield and emerging markets debt. Although our residential mortgage security selection enhanced performance, our mortgage sector weighting was a modest negative. Our international positions and our investment-grade, corporate-bond security selection were positive. Q: HOW WAS THE PORTFOLIO MANAGED? A: The U.S. economy continued to expand following an oil-induced soft spot earlier in 2004. Business spending increased while consumer spending and the housing market remained robust. These positive developments offset deterioration in the international growth environment and the associated negative impact on net exports. Fourth-quarter gross domestic product grew at 3.8% versus 4.0% during the third quarter. Data from the first quarter of 2005 suggested that firm growth would continue. Although inflation remained tame, higher commodity prices hinted that the inflation rate could increase. In addition, the employment picture remained mixed, while unemployment fell in January to 5.2%, the lowest level in more than three years, it rose to 5.4% in February. Pledging to "respond to changes in economic prospects," the Federal Reserve Board continued to raise short-term rates at a measured pace, tightening by a quarter of a percent each in November, December, and February. By the end of the period, the fed funds rate (the rate charged by banks for overnight loans) stood at 2.50%. Short-term rates rose over the period on expectations of Fed tightening. However, rates for longer-term maturities moved lower, contributing to significant flattening of the yield curve between two- and 30-year maturities. Consistent with the Fund's strategy, we maintained a strategic underweight to the mortgage sector, making purchases based on coupon selection. Despite strong fundamentals, we took advantage of rich valuations to reduce our allocation to investment-grade corporate bonds, but continued to focus on attractive BBB names. We maintained a significant weighting in high-yield and emerging markets debt, but reduced our exposure as spreads tightened substantially in both markets. In the emerging markets, we concentrated on fundamentally strong countries. We maintained a Eurozone curve-steepener position and added an outright long Euro/short U.S. dollar position in five-year maturities. 12 [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS Corporate Notes & Bonds 32.6% Foreign Government Securities 20.5% Residential Mortgage Backed Securities 19.3% Money Market Fund 9.5% Commercial Paper 6.8% Private Placements 4.8% U.S. Treasury Securities 2.7% Asset Backed Securities 1.6% Other (Less than 1%) 2.2%
13 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 2005
SINCE INCEPTION 1 YEAR 3 YEARS 5 YEARS (3/17/97) --------------------------------------------- CLASS A SHARES Without sales charge 5.76% 6.33% 5.96% 5.41% With slaes charge* 1.01% 4.70% 4.99% 4.81% CLASS B SHARES Without CDSC 5.75% 6.32% 5.95% 5.41% With CDSC** 0.75% 5.43% 5.64% 5.41% CLASS C SHARES Without CDSC 5.75% 6.32% 5.95% 5.41% With CDSC*** 4.75% 6.32% 5.95% 5.41% CLASS M SHARES Without CDSC 5.75% 6.32% 5.95% 5.41% With CDSC**** 2.61% 5.27% 5.31% 5.01% INSTITUTIONAL SHARES 6.27% 6.92% 6.53% 5.89% SELECT SHARES 6.02% 6.55% 6.18% 5.55%
* Sales Charge for Class A Shares is 4.50%. ** Assumes 5% CDSC (contingent deferred sales charge) for the one year period, 3% CDSC for the three year period, a 2% CDSC for the five year period and since inception. *** Assumes 1% CDSC for the one year and 0% thereafter. **** Sales charge on Class M shares is 3.0%. [CHART] LIFE OF FUND PERFORMANCE (3/17/97 TO 2/28/05)
JPMORGAN GLOBAL STRATEGIC LEHMAN AGGREGATE LIPPER MULTI-SECTOR INCOME FUND (INSTITUTIONAL SHARES) BOND INDEX INCOME FUNDS INDEX 3/17/1997 $ 3,000,000 $ 3,000,000 $ 3,000,000 3/31/1997 $ 2,967,900 $ 3,000,000 $ 3,000,000 4/30/1997 $ 3,018,651 $ 3,045,000 $ 3,026,700 5/31/1997 $ 3,069,968 $ 3,073,928 $ 3,076,943 6/30/1997 $ 3,114,483 $ 3,110,507 $ 3,120,636 7/31/1997 $ 3,200,131 $ 3,194,491 $ 3,192,098 8/31/1997 $ 3,179,010 $ 3,167,338 $ 3,172,946 9/30/1997 $ 3,242,590 $ 3,214,214 $ 3,237,039 10/31/1997 $ 3,184,548 $ 3,260,820 $ 3,222,149 11/30/1997 $ 3,222,444 $ 3,275,820 $ 3,235,360 12/31/1997 $ 3,256,602 $ 3,308,906 $ 3,267,713 1/31/1998 $ 3,296,658 $ 3,351,260 $ 3,309,213 2/28/1998 $ 3,327,976 $ 3,348,579 $ 3,325,098 3/31/1998 $ 3,358,927 $ 3,359,964 $ 3,361,341 4/30/1998 $ 3,365,980 $ 3,377,436 $ 3,371,089 5/31/1998 $ 3,369,683 $ 3,409,522 $ 3,364,010 6/30/1998 $ 3,365,302 $ 3,438,503 $ 3,355,600 7/31/1998 $ 3,381,456 $ 3,445,723 $ 3,368,686 8/31/1998 $ 3,260,400 $ 3,501,889 $ 3,169,597 9/30/1998 $ 3,316,479 $ 3,583,833 $ 3,224,114 10/31/1998 $ 3,276,681 $ 3,564,839 $ 3,199,289 11/30/1998 $ 3,327,142 $ 3,585,158 $ 3,312,223 12/31/1998 $ 3,341,116 $ 3,595,914 $ 3,304,605 1/31/1999 $ 3,366,508 $ 3,621,445 $ 3,322,120 2/28/1999 $ 3,322,744 $ 3,558,069 $ 3,277,603 3/31/1999 $ 3,368,597 $ 3,577,639 $ 3,318,573 4/30/1999 $ 3,422,495 $ 3,589,087 $ 3,376,980 5/31/1999 $ 3,351,307 $ 3,557,503 $ 3,306,401 6/30/1999 $ 3,341,253 $ 3,546,119 $ 3,302,764 7/31/1999 $ 3,331,564 $ 3,531,226 $ 3,295,168 8/31/1999 $ 3,315,239 $ 3,529,460 $ 3,271,443 9/30/1999 $ 3,338,446 $ 3,570,402 $ 3,285,183 10/31/1999 $ 3,361,815 $ 3,583,612 $ 3,289,454 11/30/1999 $ 3,392,407 $ 3,583,254 $ 3,311,164 12/31/1999 $ 3,424,296 $ 3,566,054 $ 3,339,640 1/31/2000 $ 3,390,738 $ 3,554,286 $ 3,308,247 2/29/2000 $ 3,448,719 $ 3,597,293 $ 3,351,916 3/31/2000 $ 3,474,930 $ 3,644,777 $ 3,350,911 4/30/2000 $ 3,451,648 $ 3,634,207 $ 3,303,663 5/31/2000 $ 3,424,380 $ 3,632,390 $ 3,262,367 6/30/2000 $ 3,501,771 $ 3,707,944 $ 3,345,557 7/31/2000 $ 3,534,687 $ 3,741,686 $ 3,356,263 8/31/2000 $ 3,586,647 $ 3,795,941 $ 3,383,784 9/30/2000 $ 3,592,027 $ 3,819,855 $ 3,353,669 10/31/2000 $ 3,594,182 $ 3,845,066 $ 3,283,242 11/30/2000 $ 3,607,481 $ 3,908,125 $ 3,244,499 12/31/2000 $ 3,696,946 $ 3,980,816 $ 3,327,234 1/31/2001 $ 3,804,527 $ 4,045,704 $ 3,442,024 2/28/2001 $ 3,810,995 $ 4,080,901 $ 3,449,596 3/31/2001 $ 3,786,986 $ 4,101,306 $ 3,390,263 4/30/2001 $ 3,761,992 $ 4,084,080 $ 3,361,107 5/31/2001 $ 3,793,969 $ 4,108,585 $ 3,390,685 6/30/2001 $ 3,776,137 $ 4,124,198 $ 3,359,490 7/31/2001 $ 3,796,906 $ 4,216,580 $ 3,392,749 8/31/2001 $ 3,850,442 $ 4,265,070 $ 3,437,873 9/30/2001 $ 3,722,992 $ 4,314,545 $ 3,331,299 10/31/2001 $ 3,804,898 $ 4,404,719 $ 3,412,916 11/30/2001 $ 3,869,582 $ 4,343,934 $ 3,445,680 12/31/2001 $ 3,844,429 $ 4,316,133 $ 3,439,133 1/31/2002 $ 3,867,111 $ 4,351,093 $ 3,457,704 2/28/2002 $ 3,870,979 $ 4,393,299 $ 3,469,806 3/31/2002 $ 3,862,075 $ 4,320,370 $ 3,472,929 4/30/2002 $ 3,899,151 $ 4,404,185 $ 3,527,107 5/31/2002 $ 3,901,101 $ 4,441,621 $ 3,537,335 6/30/2002 $ 3,839,073 $ 4,480,263 $ 3,469,418 7/31/2002 $ 3,799,915 $ 4,534,474 $ 3,424,663 8/31/2002 $ 3,877,433 $ 4,611,107 $ 3,488,704 9/30/2002 $ 3,878,596 $ 4,685,807 $ 3,494,635 10/31/2002 $ 3,902,644 $ 4,664,252 $ 3,505,818 11/30/2002 $ 3,975,233 $ 4,662,853 $ 3,589,256 12/31/2002 $ 4,030,091 $ 4,759,374 $ 3,662,477 1/31/2003 $ 4,053,465 $ 4,763,657 $ 3,709,723 2/28/2003 $ 4,107,782 $ 4,829,396 $ 3,769,821 3/31/2003 $ 4,141,466 $ 4,825,532 $ 3,808,650 4/30/2003 $ 4,238,790 $ 4,865,584 $ 3,934,716 5/31/2003 $ 4,294,318 $ 4,956,084 $ 4,023,247 6/30/2003 $ 4,301,619 $ 4,946,172 $ 4,053,421 7/31/2003 $ 4,178,592 $ 4,779,981 $ 3,956,950 8/31/2003 $ 4,220,796 $ 4,811,528 $ 3,989,001 9/30/2003 $ 4,318,719 $ 4,939,034 $ 4,105,081 10/31/2003 $ 4,308,786 $ 4,893,101 $ 4,123,144 11/30/2003 $ 4,332,053 $ 4,904,844 $ 4,165,200 12/31/2003 $ 4,395,301 $ 4,954,874 $ 4,254,335 1/31/2004 $ 4,430,463 $ 4,994,513 $ 4,295,177 2/29/2004 $ 4,452,173 $ 5,048,453 $ 4,306,344 3/31/2004 $ 4,489,571 $ 5,086,317 $ 4,340,795 4/30/2004 $ 4,423,574 $ 4,954,073 $ 4,247,034 5/31/2004 $ 4,387,743 $ 4,934,256 $ 4,204,563 6/30/2004 $ 4,415,825 $ 4,961,888 $ 4,238,620 7/31/2004 $ 4,473,672 $ 5,011,011 $ 4,280,583 8/31/2004 $ 4,551,514 $ 5,106,721 $ 4,364,054 9/30/2004 $ 4,588,381 $ 5,120,509 $ 4,419,914 10/31/2004 $ 4,642,524 $ 5,163,522 $ 4,505,660 11/30/2004 $ 4,649,488 $ 5,122,213 $ 4,558,827 12/31/2004 $ 4,696,448 $ 5,169,338 $ 4,621,739 1/31/2005 $ 4,726,975 $ 5,201,905 $ 4,618,966 2/28/2005 $ 4,732,594 $ 5,171,213 $ 4,646,679
SOURCE: LIPPER, INC. THE PERFORMANCE QUOTED IS PAST PERFORMANCE AND IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. FOR UP-TO-DATE MONTH-END PERFORMANCE INFORMATION PLEASE CALL 1-800-480-4111. The Fund commenced operations on 3/17/97. Returns for the Institutional Shares prior to 9/10/01 (offering date of the Institutional Shares) are calculated using the historical expenses of the J.P. Morgan Institutional Global Strategic Income Fund, which are similar to the expenses of the Institutional Shares. Returns for the Select Shares prior to 9/10/01 (offering date of the Select Shares) are calculated using the historical expenses of the J.P. Morgan Global Strategic Income Fund, which are similar to the expenses of the Select Shares. Returns for the Class A Shares prior to 9/10/01 (offering date of the Class A Shares) are calculated using the historical expenses of the J.P. Morgan Global Strategic Income Fund, which are lower than the expenses of the Class A Shares. Returns for Class B, Class C and M Class Shares prior to 2/19/05 (offering date of Class B, Class C and M Class shares) are calculated using the historical expenses of Class A shares, which are lower than Class B, Class C and M Class shares. The graph illustrates comparative performance for $3,000,000 invested in Institutional Shares of the JPMorgan Global Strategic Income Fund, Lehman Aggregate Bond Index, and Lipper Multi-Sector Income Funds Index from March 17, 1997 to February 28, 2005. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices reflects an initial investment at the end of the month following the Fund's inception. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman Aggregate Bond Index is composed of the Lehman Gov't/Credit Index and the Mortgage-Backed Securities Index and includes U.S. treasury issues, agency issues, corporate bond issues and mortgage-backed securities. The Lipper Multi-Sector Income Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Institutional Shares have a $3,000,000 minimum initial investment and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 14 JPMORGAN SHORT TERM BOND FUND AS OF FEBRUARY 28, 2005 (Unaudited) FUND FACTS Fund Inception 9/13/1993 Fiscal Year End AUGUST 31 Net Assets as of 2/28/2005 (In Millions) $717 Primary Benchmark MERRILL LYNCH 1-3 YEAR TREASURY INDEX Average Credit Quality A+ Duration 1.9 YEARS
Q: HOW DID THE PORTFOLIO PERFORM? A: The JPMorgan Short Term Bond Fund, which seeks to provide high total return consistent with low volatility of principal, returned 0.39% (Institutional Shares) for the six-month period ended February 28, 2005. This compares to the (0.33%) return of its benchmark, the Merrill Lynch 1-3 Year Treasury Index. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: Contributing to performance were our allocations to collateralized mortgage obligations (CMOs) and asset-backed securities. Our duration positioning detracted slightly when interest rates rose during the fourth quarter. Purchases of corporate securities added to performance as spreads tightened. Our 10-year U.S. Treasury Inflation-Protected Securities (TIPS) trade contributed to performance. However, the TIPS curve steepener detracted as did our short position in Japan as yields remained low. Also detracting was our Eurozone curve-steepener position. However, both our five-year Eurozone versus U.S. spread trade and curve-flattener position contributed. Q: HOW WAS THE PORTFOLIO MANAGED? A: The U.S. economy continued to expand following an oil-induced soft spot. Business spending increased while consumer spending and the housing market remained robust. These positive developments offset deterioration in the international growth environment and the associated negative impact on net exports. Fourth-quarter gross domestic product grew at 3.8% versus 4.0% during the third quarter. Data from the first quarter of 2005 suggested that firm growth would continue. Although inflation remained tame, higher commodity prices hinted that the inflation rate could increase. In addition, the employment picture remained mixed, while unemployment fell in January to 5.2%, the lowest level in more than three years, it rose to 5.4% in February. Pledging to "respond to changes in economic prospects," the Federal Reserve Board continued to raise short-term rates at a measured pace, tightening by a quarter of a percent each in November, December, and February. By the end of the period, the fed funds rate (the rate charged by banks for overnight loans) stood at 2.50%. Short-term rates rose over the period on expectations of Fed tightening. However, rates for longer-term maturities moved lower, contributing to significant flattening of the yield curve between two- and 30-year maturities. Throughout the period, we traded duration as the market reacted to economic data. We selectively increased our exposure to corporate and asset-backed securities. Early in the period, we sold high-quality, fixed-rate corporate issues in the one- to three-year area of the curve and bought lower credit-quality names. We reduced our allocations to sovereigns and supranationals, and added agencies and CMOs. Because their yields will increase as interest rates increase, we added floating-rate home equity loan asset-backed securities. We purchased two- and four-year CMOs at attractive prices. We swapped out of more expensive corporate issues into those with higher yields. We purchased 10-year TIPS, and implemented a curve-steepener position in two- and 10-year TIPS. We removed our long 10-year Canada/short U.S position, and the curve-steepener position in the Eurozone. Because of disappointing economic data, we removed our short-duration position in Japanese government bonds. We implemented a long five-year Eurozone/short U.S. spread trade and then removed it as spreads reached our target. 15 [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS Corporate Notes & Bonds 44.1% Asset Backed Securities 12.8% Residential Mortgage Backed Securities 12.5% Commercial Mortgage Backed Securities 10.1% Money Market Fund 8.1% Foreign Government Securities 6.2% Certificates of Deposit 2.0% Preferred Stocks 1.0% Other (Less than 1%) 3.2%
16 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 2005
1 YEAR 3 YEARS 5 YEARS 10 YEARS ------------------------------------------------ CLASS A SHARES Without Sales Charge 0.51% 2.35% 4.25% 5.04% With Sales Charge* (2.54%) 1.30% 3.61% 4.72% INSTITUTIONAL SHARES 0.96% 2.78% 4.66% 5.37% SELECT SHARES 0.70% 2.51% 4.38% 5.11%
* Sales Charge for Class A Shares is 3.00%. [CHART] TEN-YEAR PERFORMANCE (2/28/95 TO 2/28/05)
JPMORGAN SHORT TERM BOND FUND MERRILL LYNCH 1-3 YEAR LIPPER SHORT-TERM INVESTMENT (INSTITUTIONAL SHARES) TREASURY INDEX GRADE DEBT FUNDS INDEX 2/28/1995 $ 3,000,000 $ 3,000,000 $ 3,000,000 3/31/1995 $ 3,018,900 $ 3,016,800 $ 3,016,500 4/30/1995 $ 3,047,278 $ 3,043,650 $ 3,042,442 5/31/1995 $ 3,104,262 $ 3,096,913 $ 3,098,119 6/30/1995 $ 3,120,093 $ 3,113,637 $ 3,117,327 7/31/1995 $ 3,126,334 $ 3,126,403 $ 3,127,302 8/31/1995 $ 3,148,218 $ 3,145,161 $ 3,148,255 9/30/1995 $ 3,166,793 $ 3,160,572 $ 3,163,367 10/31/1995 $ 3,188,643 $ 3,187,121 $ 3,193,103 11/30/1995 $ 3,217,022 $ 3,215,168 $ 3,219,925 12/31/1995 $ 3,242,437 $ 3,239,925 $ 3,242,142 1/31/1996 $ 3,270,322 $ 3,267,464 $ 3,271,321 2/29/1996 $ 3,248,411 $ 3,253,741 $ 3,259,218 3/31/1996 $ 3,253,608 $ 3,250,812 $ 3,244,877 4/30/1996 $ 3,255,235 $ 3,253,413 $ 3,247,148 5/31/1996 $ 3,266,303 $ 3,260,245 $ 3,253,643 6/30/1996 $ 3,288,513 $ 3,283,719 $ 3,277,069 7/31/1996 $ 3,297,392 $ 3,296,525 $ 3,290,505 8/31/1996 $ 3,309,923 $ 3,307,734 $ 3,302,022 9/30/1996 $ 3,339,712 $ 3,337,834 $ 3,333,721 10/31/1996 $ 3,380,122 $ 3,375,551 $ 3,369,392 11/30/1996 $ 3,406,825 $ 3,401,543 $ 3,397,358 12/31/1996 $ 3,407,847 $ 3,401,543 $ 3,398,717 1/31/1997 $ 3,425,227 $ 3,417,530 $ 3,416,050 2/28/1997 $ 3,435,503 $ 3,425,391 $ 3,427,665 3/31/1997 $ 3,435,847 $ 3,424,021 $ 3,424,237 4/30/1997 $ 3,460,241 $ 3,452,098 $ 3,451,631 5/31/1997 $ 3,485,155 $ 3,475,572 $ 3,474,757 6/30/1997 $ 3,506,763 $ 3,499,553 $ 3,499,080 7/31/1997 $ 3,543,233 $ 3,538,048 $ 3,538,970 8/31/1997 $ 3,547,131 $ 3,541,233 $ 3,541,447 9/30/1997 $ 3,576,572 $ 3,568,146 $ 3,569,070 10/31/1997 $ 3,591,594 $ 3,594,550 $ 3,590,842 11/30/1997 $ 3,599,495 $ 3,603,177 $ 3,599,819 12/31/1997 $ 3,625,411 $ 3,627,679 $ 3,621,418 1/31/1998 $ 3,666,016 $ 3,662,867 $ 3,652,924 2/28/1998 $ 3,669,682 $ 3,666,164 $ 3,658,038 3/31/1998 $ 3,684,361 $ 3,681,195 $ 3,673,036 4/30/1998 $ 3,703,151 $ 3,698,497 $ 3,690,299 5/31/1998 $ 3,725,000 $ 3,718,099 $ 3,710,227 6/30/1998 $ 3,739,527 $ 3,737,433 $ 3,726,923 7/31/1998 $ 3,761,964 $ 3,754,999 $ 3,743,321 8/31/1998 $ 3,788,298 $ 3,802,312 $ 3,768,776 9/30/1998 $ 3,855,730 $ 3,852,502 $ 3,808,725 10/31/1998 $ 3,857,272 $ 3,871,380 $ 3,803,774 11/30/1998 $ 3,862,286 $ 3,867,895 $ 3,813,663 12/31/1998 $ 3,880,825 $ 3,881,433 $ 3,830,062 1/31/1999 $ 3,902,558 $ 3,895,406 $ 3,849,213 2/28/1999 $ 3,884,997 $ 3,877,487 $ 3,836,510 3/31/1999 $ 3,915,300 $ 3,904,242 $ 3,866,435 4/30/1999 $ 3,929,395 $ 3,916,735 $ 3,880,354 5/31/1999 $ 3,915,642 $ 3,914,385 $ 3,875,310 6/30/1999 $ 3,909,377 $ 3,926,520 $ 3,882,673 7/31/1999 $ 3,915,241 $ 3,939,085 $ 3,886,944 8/31/1999 $ 3,929,336 $ 3,950,508 $ 3,894,718 9/30/1999 $ 3,959,199 $ 3,976,187 $ 3,920,423 10/31/1999 $ 3,973,848 $ 3,986,922 $ 3,929,048 11/30/1999 $ 3,993,319 $ 3,994,497 $ 3,942,013 12/31/1999 $ 4,005,299 $ 4,000,090 $ 3,950,292 1/31/2000 $ 4,008,904 $ 3,998,490 $ 3,951,872 2/29/2000 $ 4,028,949 $ 4,025,280 $ 3,977,559 3/31/2000 $ 4,037,409 $ 4,050,236 $ 3,998,242 4/30/2000 $ 4,058,404 $ 4,060,767 $ 3,999,042 5/31/2000 $ 4,075,855 $ 4,077,416 $ 4,013,039 6/30/2000 $ 4,097,457 $ 4,119,821 $ 4,057,583 7/31/2000 $ 4,124,091 $ 4,145,776 $ 4,082,740 8/31/2000 $ 4,142,237 $ 4,176,455 $ 4,112,544 9/30/2000 $ 4,177,031 $ 4,206,525 $ 4,147,501 10/31/2000 $ 4,191,233 $ 4,229,240 $ 4,159,943 11/30/2000 $ 4,244,462 $ 4,269,418 $ 4,197,799 12/31/2000 $ 4,294,122 $ 4,320,224 $ 4,242,296 1/31/2001 $ 4,330,622 $ 4,374,227 $ 4,302,536 2/28/2001 $ 4,364,834 $ 4,402,660 $ 4,332,654 3/31/2001 $ 4,395,825 $ 4,439,202 $ 4,363,849 4/30/2001 $ 4,394,506 $ 4,451,188 $ 4,374,322 5/31/2001 $ 4,419,994 $ 4,476,114 $ 4,401,443 6/30/2001 $ 4,439,884 $ 4,491,333 $ 4,419,489 7/31/2001 $ 4,495,382 $ 4,541,636 $ 4,473,849 8/31/2001 $ 4,527,749 $ 4,567,977 $ 4,502,929 9/30/2001 $ 4,591,138 $ 4,643,349 $ 4,545,707 10/31/2001 $ 4,639,804 $ 4,686,997 $ 4,580,254 11/30/2001 $ 4,617,069 $ 4,676,685 $ 4,557,811 12/31/2001 $ 4,620,762 $ 4,678,556 $ 4,553,253 1/31/2002 $ 4,640,170 $ 4,687,913 $ 4,566,457 2/28/2002 $ 4,659,194 $ 4,710,415 $ 4,579,700 3/31/2002 $ 4,631,239 $ 4,678,384 $ 4,559,091 4/30/2002 $ 4,691,445 $ 4,730,782 $ 4,595,564 5/31/2002 $ 4,708,804 $ 4,749,705 $ 4,621,299 6/30/2002 $ 4,736,115 $ 4,789,603 $ 4,626,383 7/31/2002 $ 4,787,265 $ 4,848,036 $ 4,640,262 8/31/2002 $ 4,804,977 $ 4,864,519 $ 4,669,496 9/30/2002 $ 4,846,300 $ 4,904,895 $ 4,699,847 10/31/2002 $ 4,862,778 $ 4,916,176 $ 4,702,667 11/30/2002 $ 4,846,731 $ 4,901,427 $ 4,704,548 12/31/2002 $ 4,878,719 $ 4,947,501 $ 4,751,594 1/31/2003 $ 4,899,210 $ 4,947,006 $ 4,759,196 2/28/2003 $ 4,924,196 $ 4,967,783 $ 4,787,751 3/31/2003 $ 4,932,074 $ 4,976,725 $ 4,794,933 4/30/2003 $ 4,949,337 $ 4,986,181 $ 4,815,551 5/31/2003 $ 4,972,103 $ 5,005,129 $ 4,843,000 6/30/2003 $ 4,973,595 $ 5,012,636 $ 4,851,717 7/31/2003 $ 4,910,430 $ 4,985,568 $ 4,809,022 8/31/2003 $ 4,922,215 $ 4,989,058 $ 4,813,350 9/30/2003 $ 4,972,914 $ 5,034,458 $ 4,863,409 10/31/2003 $ 4,942,580 $ 5,015,831 $ 4,851,737 11/30/2003 $ 4,941,591 $ 5,013,323 $ 4,852,707 12/31/2003 $ 4,971,735 $ 5,042,400 $ 4,876,971 1/31/2004 $ 4,986,650 $ 5,052,485 $ 4,892,577 2/29/2004 $ 5,011,085 $ 5,076,737 $ 4,915,083 3/31/2004 $ 5,026,118 $ 5,092,475 $ 4,931,794 4/30/2004 $ 4,979,375 $ 5,043,587 $ 4,887,901 5/31/2004 $ 4,973,898 $ 5,039,048 $ 4,878,126 6/30/2004 $ 4,974,395 $ 5,038,544 $ 4,881,540 7/31/2004 $ 5,001,754 $ 5,056,683 $ 4,901,066 8/31/2004 $ 5,039,767 $ 5,091,574 $ 4,935,864 9/30/2004 $ 5,041,783 $ 5,086,992 $ 4,937,345 10/31/2004 $ 5,064,976 $ 5,102,252 $ 4,953,638 11/30/2004 $ 5,047,248 $ 5,076,741 $ 4,939,768 12/31/2004 $ 5,059,362 $ 5,087,402 $ 4,955,081 1/31/2005 $ 5,060,373 $ 5,085,367 $ 4,955,577 2/28/2005 $ 5,060,274 $ 5,073,671 $ 4,950,621
SOURCE: LIPPER, INC. THE PERFORMANCE QUOTED IS PAST PERFORMANCE AND IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. FOR UP-TO-DATE MONTH-END PERFORMANCE INFORMATION PLEASE CALL 1-800-480-4111. The Fund commenced operations on 9/13/93. Returns for the Institutional Shares prior to 9/10/01 (offering date of the Institutional Shares) are calculated using the historical expenses of the J.P. Morgan Institutional Short Term Bond Fund, which are similar to the expenses of the Institutional Shares. Returns for the Select Shares prior to 9/10/01 (offering date of the Select Shares) are calculated using the historical expenses of the J.P. Morgan Short Term Bond Fund, which are similar to the expenses of the Select Shares. Returns for the Class A Shares prior to 9/10/01 (offering date of the Class A Shares) are calculated using the historical expenses of the J.P. Morgan Short Term Bond Fund, which are lower than the expenses of the Class A Shares. The graph illustrates comparative performance for $3,000,000 invested in Institutional Shares of the JPMorgan Short Term Bond Fund, Merrill Lynch 1-3 Year Treasury Index, and Lipper Short-Term Investment Grade Debt Funds Index from February 28, 1995 to February 28, 2005. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index which measures short-term bond performance. The Lipper Short-Term Investment Grade Debt Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Institutional Shares have a $3,000,000 minimum initial investment and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 17 JPMORGAN SHORT TERM BOND FUND II AS OF FEBRUARY 28, 2005 (Unaudited) FUND FACTS Fund Inception 11/30/1990 Fiscal Year End AUGUST 31 Net Assets as of 2/28/2005 (In Millions) $1,008 Primary Benchmark LEHMAN 1-3 YEAR U.S. GOV'T BOND INDEX Average Credit Quality A+ Duration 1.9 YEARS
Q: HOW DID THE PORTFOLIO PERFORM? A: The JPMorgan Short Term Bond Fund II, which seeks a high level of income consistent with preservation of capital, returned 0.17% (Select Shares) for the six-month period ended February 28, 2005. This compares to the (0.25%) return of its benchmark, the Lehman 1-3 Year U.S. Government Bond Index. Q: WHY DID THE PORTFOLIO PERFORM THIS WAY? A: Contributing significantly to performance were our allocations to collateralized mortgage obligations (CMOs) and asset-backed securities. Our duration positioning detracted slightly from performance when interest rates rose sharply during the fourth quarter. Selective purchases of corporate securities added to performance as spreads continued to tighten. Our 10-year U.S. Treasury Inflation-Protected Securities (TIPS) trade contributed to performance; however, the TIPS curve-steepener position detracted. Q: HOW WAS THE PORTFOLIO MANAGED? A: The U.S. economy continued to expand following an oil-induced soft spot earlier in 2004. Business spending increased while consumer spending and the housing market remained robust. These positive developments offset deterioration in the international growth environment and the associated negative impact on net exports. Fourth-quarter gross domestic product grew at 3.8% versus 4.0% during the third quarter. Data from the first quarter of 2005 suggested that firm growth would continue. Although inflation remained tame, higher commodity prices hinted that the inflation rate could increase. In addition, the employment picture remained mixed, while unemployment fell in January to 5.2%, the lowest level in more than three years, it rose to 5.4% in February. Pledging to "respond to changes in economic prospects," the Federal Reserve Board continued to raise short-term rates at a measured pace, tightening by a quarter of a percent each in November, December, and February. By the end of the period, the fed funds rate (the rate charged by banks for overnight loans) stood at 2.50%. Short-term rates rose over the period on expectations of Fed tightening. However, rates for longer-term maturities moved lower, contributing to significant flattening of the yield curve between two- and 30-year maturities. Throughout the period, we tactically traded duration as the market reacted to economic data. We continued to selectively increase our exposure to corporate and asset-backed securities. Early in the period, we sold high-quality, fixed-rate corporate issues in the one- to three-year area of the curve and bought lower credit-quality names. We reduced our allocations to sovereigns and supranationals, and added agencies and CMOs. Because their yields will increase as interest rates increase, we added floating-rate home equity loan asset-backed securities. We purchased two- and four-year CMOs at attractive prices. Although we maintain our allocation to corporate securities, we have swapped out of more expensive issues into those with higher yields. We purchased 10-year TIPS and implemented a curve-steepener position in two- and 10-year TIPS. 18 [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS Corporate Notes & Bonds 41.5% Asset Backed Securities 15.2% Residential Mortgage Backed Securities 13.4% U.S. Government Agency Securities 12.7% Commercial Mortgage Backed Securities 10.8% Certificates of Deposit 2.1% Foreign Government Securities 1.1% Other (Less than 1%) 3.2%
19 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 2005
1 YEAR 3 YEARS 5 YEARS 10 YEARS ---------------------------------------------- CLASS A SHARES Without Sales Charge 0.21% 2.16% 4.16% 4.66% With Sales Charge* (2.81%) 1.12% 3.53% 4.34% CLASS M SHARES Without Sales Charge 0.05% 1.93% 3.90% 4.52% With Sales Charge** (1.48%) 1.40% 3.59% 4.36% SELECT SHARES 0.57% 2.44% 4.44% 4.96%
* Sales Charge for Class A Shares is 3.00%. ** Sales Charge for Class M Shares is 1.50%. [CHART] TEN-YEAR PERFORMANCE (02/28/95 TO 02/28/05)
JPMORGAN SHORT TERM BOND FUND II LEHMAN 1-3 YEAR LIPPER SHORT-TERM INVESTMENT (SELECT SHARES) U.S. GOV'T BOND INDEX GRADE DEBT FUNDS INDEX 2/28/1995 $ 1,000,000 $ 1,000,000 $ 1,000,000 3/31/1995 $ 1,005,600 $ 1,005,600 $ 1,005,500 4/30/1995 $ 1,011,231 $ 1,014,550 $ 1,014,147 5/31/1995 $ 1,023,063 $ 1,031,899 $ 1,032,706 6/30/1995 $ 1,028,792 $ 1,037,471 $ 1,039,109 7/31/1995 $ 1,033,627 $ 1,041,621 $ 1,042,434 8/31/1995 $ 1,038,485 $ 1,047,871 $ 1,049,418 9/30/1995 $ 1,043,262 $ 1,053,005 $ 1,054,456 10/31/1995 $ 1,050,252 $ 1,061,745 $ 1,064,368 11/30/1995 $ 1,057,079 $ 1,070,770 $ 1,073,308 12/31/1995 $ 1,063,316 $ 1,078,908 $ 1,080,714 1/31/1996 $ 1,070,652 $ 1,088,078 $ 1,090,440 2/29/1996 $ 1,070,224 $ 1,083,835 $ 1,086,406 3/31/1996 $ 1,072,793 $ 1,082,968 $ 1,081,626 4/30/1996 $ 1,075,475 $ 1,084,051 $ 1,082,383 5/31/1996 $ 1,078,379 $ 1,086,436 $ 1,084,548 6/30/1996 $ 1,084,957 $ 1,094,367 $ 1,092,356 7/31/1996 $ 1,089,839 $ 1,098,635 $ 1,096,835 8/31/1996 $ 1,092,999 $ 1,102,700 $ 1,100,674 9/30/1996 $ 1,102,618 $ 1,112,734 $ 1,111,240 10/31/1996 $ 1,114,306 $ 1,125,308 $ 1,123,131 11/30/1996 $ 1,123,109 $ 1,133,635 $ 1,132,453 12/31/1996 $ 1,123,109 $ 1,133,862 $ 1,132,906 1/31/1997 $ 1,127,489 $ 1,139,305 $ 1,138,683 2/28/1997 $ 1,130,420 $ 1,142,039 $ 1,142,555 3/31/1997 $ 1,129,742 $ 1,141,125 $ 1,141,412 4/30/1997 $ 1,140,136 $ 1,150,483 $ 1,150,544 5/31/1997 $ 1,146,520 $ 1,158,536 $ 1,158,252 6/30/1997 $ 1,155,119 $ 1,166,530 $ 1,166,360 7/31/1997 $ 1,168,172 $ 1,179,245 $ 1,179,657 8/31/1997 $ 1,167,238 $ 1,180,424 $ 1,180,482 9/30/1997 $ 1,176,692 $ 1,189,396 $ 1,189,690 10/31/1997 $ 1,183,635 $ 1,198,197 $ 1,196,947 11/30/1997 $ 1,184,937 $ 1,201,193 $ 1,199,940 12/31/1997 $ 1,191,928 $ 1,209,241 $ 1,207,139 1/31/1998 $ 1,203,609 $ 1,220,728 $ 1,217,641 2/28/1998 $ 1,203,849 $ 1,221,827 $ 1,219,346 3/31/1998 $ 1,207,341 $ 1,226,470 $ 1,224,345 4/30/1998 $ 1,213,015 $ 1,232,357 $ 1,230,100 5/31/1998 $ 1,219,808 $ 1,238,888 $ 1,236,742 6/30/1998 $ 1,226,395 $ 1,245,207 $ 1,242,308 7/31/1998 $ 1,232,036 $ 1,251,059 $ 1,247,774 8/31/1998 $ 1,240,045 $ 1,266,322 $ 1,256,259 9/30/1998 $ 1,257,529 $ 1,283,418 $ 1,269,575 10/31/1998 $ 1,255,140 $ 1,289,706 $ 1,267,925 11/30/1998 $ 1,254,763 $ 1,288,417 $ 1,271,221 12/31/1998 $ 1,258,653 $ 1,293,313 $ 1,276,687 1/31/1999 $ 1,264,821 $ 1,298,227 $ 1,283,071 2/28/1999 $ 1,260,520 $ 1,292,385 $ 1,278,837 3/31/1999 $ 1,269,470 $ 1,301,173 $ 1,288,812 4/30/1999 $ 1,273,278 $ 1,305,207 $ 1,293,451 5/31/1999 $ 1,272,387 $ 1,304,293 $ 1,291,770 6/30/1999 $ 1,273,787 $ 1,308,076 $ 1,294,224 7/31/1999 $ 1,276,716 $ 1,312,131 $ 1,295,648 8/31/1999 $ 1,278,504 $ 1,315,805 $ 1,298,239 9/30/1999 $ 1,287,965 $ 1,324,358 $ 1,306,808 10/31/1999 $ 1,292,472 $ 1,327,933 $ 1,309,683 11/30/1999 $ 1,294,411 $ 1,330,456 $ 1,314,004 12/31/1999 $ 1,297,777 $ 1,331,654 $ 1,316,764 1/31/2000 $ 1,298,296 $ 1,331,387 $ 1,317,291 2/29/2000 $ 1,305,696 $ 1,340,441 $ 1,325,853 3/31/2000 $ 1,312,355 $ 1,348,484 $ 1,332,747 4/30/2000 $ 1,308,156 $ 1,351,855 $ 1,333,014 5/31/2000 $ 1,312,342 $ 1,356,857 $ 1,337,680 6/30/2000 $ 1,327,171 $ 1,371,646 $ 1,352,528 7/31/2000 $ 1,336,727 $ 1,380,425 $ 1,360,913 8/31/2000 $ 1,346,485 $ 1,390,916 $ 1,370,848 9/30/2000 $ 1,360,084 $ 1,401,765 $ 1,382,500 10/31/2000 $ 1,364,437 $ 1,409,335 $ 1,386,648 11/30/2000 $ 1,379,582 $ 1,423,005 $ 1,399,266 12/31/2000 $ 1,395,447 $ 1,440,508 $ 1,414,099 1/31/2001 $ 1,410,518 $ 1,459,523 $ 1,434,179 2/28/2001 $ 1,420,674 $ 1,469,010 $ 1,444,218 3/31/2001 $ 1,432,039 $ 1,480,909 $ 1,454,616 4/30/2001 $ 1,433,471 $ 1,485,204 $ 1,458,107 5/31/2001 $ 1,439,635 $ 1,493,372 $ 1,467,148 6/30/2001 $ 1,444,674 $ 1,498,748 $ 1,473,163 7/31/2001 $ 1,460,421 $ 1,516,284 $ 1,491,283 8/31/2001 $ 1,470,059 $ 1,525,836 $ 1,500,976 9/30/2001 $ 1,489,170 $ 1,551,318 $ 1,515,236 10/31/2001 $ 1,504,955 $ 1,566,831 $ 1,526,751 11/30/2001 $ 1,498,635 $ 1,562,444 $ 1,519,270 12/31/2001 $ 1,496,686 $ 1,563,381 $ 1,517,751 1/31/2002 $ 1,501,775 $ 1,567,133 $ 1,522,152 2/28/2002 $ 1,509,734 $ 1,574,969 $ 1,526,567 3/31/2002 $ 1,500,978 $ 1,563,629 $ 1,519,697 4/30/2002 $ 1,519,440 $ 1,582,549 $ 1,531,855 5/31/2002 $ 1,525,062 $ 1,588,721 $ 1,540,433 6/30/2002 $ 1,532,992 $ 1,602,861 $ 1,542,128 7/31/2002 $ 1,548,476 $ 1,622,255 $ 1,546,754 8/31/2002 $ 1,554,669 $ 1,628,907 $ 1,556,499 9/30/2002 $ 1,566,019 $ 1,642,101 $ 1,566,616 10/31/2002 $ 1,571,343 $ 1,646,206 $ 1,567,556 11/30/2002 $ 1,567,100 $ 1,641,597 $ 1,568,183 12/31/2002 $ 1,577,757 $ 1,657,356 $ 1,583,865 1/31/2003 $ 1,583,910 $ 1,657,687 $ 1,586,399 2/28/2003 $ 1,589,770 $ 1,665,313 $ 1,595,917 3/31/2003 $ 1,591,996 $ 1,668,643 $ 1,598,311 4/30/2003 $ 1,597,250 $ 1,671,981 $ 1,605,184 5/31/2003 $ 1,603,958 $ 1,678,836 $ 1,614,333 6/30/2003 $ 1,606,043 $ 1,681,522 $ 1,617,239 7/31/2003 $ 1,584,683 $ 1,670,592 $ 1,603,007 8/31/2003 $ 1,588,011 $ 1,671,260 $ 1,604,450 9/30/2003 $ 1,605,479 $ 1,688,140 $ 1,621,136 10/31/2003 $ 1,594,562 $ 1,681,219 $ 1,617,246 11/30/2003 $ 1,593,924 $ 1,680,882 $ 1,617,569 12/31/2003 $ 1,601,734 $ 1,690,800 $ 1,625,657 1/31/2004 $ 1,606,059 $ 1,694,857 $ 1,630,859 2/29/2004 $ 1,613,446 $ 1,703,671 $ 1,638,361 3/31/2004 $ 1,619,578 $ 1,709,293 $ 1,643,931 4/30/2004 $ 1,603,544 $ 1,691,858 $ 1,629,300 5/31/2004 $ 1,599,856 $ 1,689,828 $ 1,626,042 6/30/2004 $ 1,600,176 $ 1,689,997 $ 1,627,180 7/31/2004 $ 1,606,736 $ 1,696,757 $ 1,633,689 8/31/2004 $ 1,619,912 $ 1,709,313 $ 1,645,288 9/30/2004 $ 1,620,236 $ 1,707,945 $ 1,645,782 10/31/2004 $ 1,626,878 $ 1,713,752 $ 1,651,213 11/30/2004 $ 1,621,347 $ 1,705,355 $ 1,646,589 12/31/2004 $ 1,623,941 $ 1,708,936 $ 1,651,694 1/31/2005 $ 1,623,454 $ 1,708,594 $ 1,651,859 2/28/2005 $ 1,622,380 $ 1,705,006 $ 1,650,207
SOURCE: LIPPER, INC. THE PERFORMANCE QUOTED IS PAST PERFORMANCE AND IS NOT A GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. FOR UP-TO-DATE MONTH-END PERFORMANCE INFORMATION PLEASE CALL 1-800-480-4111. The Fund commenced operations on 11/30/90. Returns for the Class A Shares prior to 5/6/96 (offering date of the Class A Shares) are calculated using the historical expenses of the Select Shares, which are lower than the expenses of the Class A Shares. Returns for the Class M Shares prior to 7/1/99 (offering date of the Class M Shares) are calculated using the historical expenses of the Class A Shares, which are lower than the expenses of the Class M Shares. The graph illustrates comparative performance for $1,000,000 invested in Select Shares of the JPMorgan Short Term Bond Fund II, Lehman 1-3 Year U.S. Gov't Bond Index, and Lipper Short-Term Investment Grade Debt Funds Index from February 28, 1995 to February 28, 2005. The performance of the Fund assumes reinvestments of all dividends and capital gains and does not include a sales charge. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman 1-3 Year U.S. Gov't Bond Index is composed of bonds covered by the U.S. Government Bond Index with maturities of one to three years. The Lipper Short-Term Investment Grade Debt Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Select Shares have a $1,000,000 minimum initial investment and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 20 JPMORGAN BOND FUND PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2005 (Amounts in thousands)
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 121.3% U.S. TREASURY SECURITIES -- 1.7% U.S. Treasury Notes & Bonds, $ 1,720 3.50%, 11/15/06 + @ $ 1,719 1,075 3.88%, 05/15/09 + @ 1,074 365 3.38%, 10/15/09 + 356 7,903 1.62%, 01/15/15 7,852 350 7.25%, 05/15/16 + @ 434 2,790 5.38%, 02/15/31 + @ 3,068 ---------------------------------------------------------------------------- Total U.S. Treasury Securities 14,503 (Cost $14,509) ---------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY SECURITIES -- 1.3% 8,090 Federal Home Loan Mortgage Corp., 6.25%, 07/15/32 + 9,454 Federal National Mortgage Association, 2 7.00%, 07/15/05 + 2 985 4.38%, 09/15/12 + 975 570 7.25%, 05/15/30 + 742 ---------------------------------------------------------------------------- Total U.S. Government Agency Securities 11,173 (Cost $10,318) ---------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 8.6% 3,500 Aries Vermoegensverwaltungs (Russia), 9.60%, 10/25/14, # 4,337 Federal Republic of Brazil (Brazil), 705 11.00%, 01/11/12 846 1,738 3.13%, 04/15/12, FRN 1,680 1,030 11.00%, 08/17/40 + 1,192 EUR 9,363 Federal Republic of Germany (Germany), 4.75%, 07/04/34, Ser. 03 13,614 4,690 Republic of Colombia (Colombia), 9.75%, 04/09/11 5,324 10,500 Republic of Italy (Italy), 4.50%, 01/21/15 10,336 1,905 Republic of Peru (Peru), 8.75%, 11/21/33 2,072 1,900 Republic of Turkey (Turkey), 7.38%, 02/05/25 1,914 Republic of Ukraine (Ukraine), $ 1,387 6.88%, 03/04/11, # $ 1,460 3,185 7.65%, 06/11/13, Regulation S 3,504 Russian Federation (Russia), 2,720 8.75%, 07/24/05, Regulation S 2,774 8,670 8.75%, 07/24/05, # + 8,843 760 12.75%, 06/24/28, Regulation S 1,296 5,170 5.00%, 03/31/30, Regulation S, SUB 5,425 United Mexican States (Mexico), 850 7.50%, 01/14/12 955 1,730 5.88%, 01/15/14, Ser. A, MTN 1,767 1,280 11.50%, 05/15/26 2,010 2,160 8.30%, 08/15/31, MTN 2,603 ---------------------------------------------------------------------------- Total Foreign Government Securities 71,952 (Cost $65,856) ---------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 35.7% AEROSPACE -- 0.3% 2,735 General Dynamics Corp., 2.13%, 05/15/06 + 2,685 AUTOMOTIVE -- 3.6% 1,765 American Honda Finance Corp., 2.87%, 05/11/07, MTN, FRN, # + 1,766 2,800 DaimlerChrysler N.A. Holding Corp., 3.47%, 05/24/06, MTN, FRN + 2,814 8,370 Ford Motor Credit Co., 7.88%, 06/15/10 + 8,935 General Motors Acceptance Corp., 1,550 3.70%, 05/18/06, MTN, FRN + 1,550 4,790 3.56%, 01/16/07, MTN, FRN + 4,753 2,245 6.75%, 12/01/14 + 2,160 General Motors Corp., 3,600 7.20%, 01/15/11 + 3,575 1,410 8.25%, 07/15/23 + 1,386 2,140 8.38%, 07/15/33 + 2,102 549 TRW Automotive, Inc., 9.38%, 02/15/13 + 620 ---------------------------------------------------------------------------- 29,661 ----------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 21
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED BANKING -- 6.1% $ 1,040 ABN-Amro North American Holding Preferred Capital Repackage Trust I, 6.52%, to 11/12; thereafter FRN, 12/31/49, # + $ 1,142 2,000 BBVA Bancomer Capital Trust I (Mexico), 10.50%, 02/16/11, # + 2,123 1,750 Cadets Trust, 4.80%, 07/15/13, Ser. 2003-1, # + 1,708 1,720 Industrial Bank of Korea (South Korea), 4.00%, to 05/09; thereafter FRN, 05/19/14, # + 1,665 3,955 KBC Bank Fund Trust III, 9.86%, to 11/09; thereafter FRN, 11/29/49, # + 4,757 2,100 KeyCorp, 2.89%, 07/23/07, Ser. G, MTN, FRN + 2,101 1,545 Korea First Bank (South Korea), 7.27%, to 03/14; thereafter FRN, 03/03/34, # + 1,744 390 Mizuho Finance Group LTD (Cayman Islands), 5.79%, 04/15/14, # + 407 1,500 Nordea Bank AB (Sweden), 8.95%, to 11/09; thereafter FRN, 12/31/49, # + 1,759 755 Northern Rock PLC (United Kingdom), 5.60%, to 04/14; thereafter FRN, 12/31/49, MTN, # + 772 1,595 Popular North America, Inc., 4.70%, 06/30/09 + 1,602 5,300 RBS Capital Trust I, 5.51%, to 9/14; thereafter FRN, 12/31/49 + 5,411 1,750 Royal Bank of Scotland Group PLC (United Kingdom), 2.88%, 11/24/06, FRN, # + 1,750 3,665 SunTrust Bank, 2.50%, 11/01/06 + 3,582 1,870 Swedbank (Sweden), 9.00%, to 03/10; thereafter FRN, 12/31/49, # + 2,206 1,800 The Chuo Mitsui Trust & Banking Co., LTD (Japan), 5.51% to 4/15; thereafter FRN, 12/31/49, # + 1,765 $ 4,885 U.S. Bank N.A., 2.85%, 11/15/06 $ 4,807 2,620 United Overseas Bank LTD (Singapore), 5.38%, to 9/14; thereafter FRN, 09/03/19, # 2,644 2,500 Wachovia Corp., 2.77%, 07/20/07, FRN 2,501 1,500 Wells Fargo & Co., 2.59%, 03/23/07, FRN 1,501 2,800 Westpac Banking Corp. (Australia), 2.93%, 05/25/07, FRN, # 2,802 1,475 Woori Bank (South Korea), 5.75%, to 03/09; thereafter FRN, 03/13/14, # 1,529 ---------------------------------------------------------------------------- 50,278 ---------------------------------------------------------------------------- BROADCASTING/CABLE -- 0.3% 2,180 Cox Communications, Inc., 4.63%, 06/01/13 + 2,082 495 Echostar DBS Corp., 6.38%, 10/01/11 + 510 ---------------------------------------------------------------------------- 2,592 ---------------------------------------------------------------------------- BUSINESS SERVICES -- 0.1% 490 Iron Mountain, Inc., 6.63%, 01/01/16 + 458 CHEMICALS -- 0.6% 490 Huntsman International LLC, 9.88%, 03/01/09 + 540 2,355 ICI Wilmington, Inc., 5.63%, 12/01/13 + 2,427 20 IMC Global, Inc., 10.88%, 06/01/08, Ser. B + 23 810 Lyondell Chemical Co., 10.88%, 05/01/09 + 846 20 Millennium America, Inc., 9.25%, 06/15/08 + 22 775 PolyOne Corp., 10.63%, 05/15/10 + 884 ---------------------------------------------------------------------------- 4,742 ----------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 22
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED COMPUTER SOFTWARE -- 0.1% $ 1,095 Computer Associates International, Inc., 5.63%, 12/01/14, # + $ 1,110 CONSTRUCTION -- 0.3% 1,520 Pulte Homes, Inc., 5.25%, 01/15/14 + 1,507 745 Standard-Pacific Corp., 6.88%, 05/15/11 + 792 ---------------------------------------------------------------------------- 2,299 ---------------------------------------------------------------------------- CONSTRUCTION MATERIALS -- 0.3% 2,540 KB Home, 5.75%, 02/01/14 + 2,578 CONSUMER SERVICES -- 0.0% ^ 355 Service Corp. International, 7.70%, 04/15/09 + 382 DIVERSIFIED -- 0.2% 1,260 Hutchison Whampoa International LTD (Hong Kong), 6.25%, 01/24/14, # + 1,336 ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.1% 545 Celestica, Inc. (Canada), 7.88%, 07/01/11 + 574 ENVIRONMENTAL SERVICES -- 0.2% 2,205 Allied Waste North America, Inc., 6.13%, 02/15/14 + 2,084 FINANCIAL SERVICES -- 10.6% 940 Aiful Corp. (Japan), 4.45%, 02/16/10, # + 925 American General Finance Corp., 4,195 3.00%, 11/15/06, Ser. H, MTN + 4,118 1,065 4.50%, 11/15/07, Ser. H, MTN + 1,072 600 Arch Western Finance LLC, 6.75%, 07/01/13 + 624 4,790 The Bear Stearns Companies, Inc., 2.82%, 01/16/07, Ser. B, MTN, FRN + 4,795 $ 1,325 Capital One Bank, 8.25%, 06/15/05 + $ 1,343 Capital One Financial Corp., 2,910 8.75%, 02/01/07 + 3,151 420 5.25%, 02/21/17 + 409 3,255 Caterpillar Financial Services Corp., 2.96%, 02/26/07, Ser. F, MTN, FRN + 3,258 CIT Group, Inc., 2,650 2.77%, 04/19/06, MTN, FRN + 2,651 2,500 2.73%, 06/19/06, MTN, FRN + 2,504 2,900 Citigroup, Inc., 2.64%, 03/20/06, FRN + 2,904 3,100 Countrywide Home Loans, Inc., 2.96%, 02/17/06, Ser. L, MTN, FRN + 3,101 1,810 General Electric Capital Corp., 6.75%, 03/15/32, Ser. A, MTN + 2,132 Goldman Sachs Group, Inc., 1,750 3.05%, 02/21/06, Ser. B, MTN, FRN + 1,753 2,125 5.13%, 01/15/15 + 2,127 2,020 6.35%, 02/15/34 + 2,141 3,590 Household Finance Corp., 2.92%, 02/09/07, MTN, FRN + 3,595 HSBC Capital Funding LP (Channel Islands), 1,980 4.61%, to 06/13; thereafter FRN, 12/31/49, # + 1,911 2,665 9.55%, to 06/10; thereafter FRN, 12/31/49, # + (i) 3,265 1,865 ING Capital Funding Trust III, 8.44%, to 12/10; thereafter FRN, 12/31/49 + 2,207 2,000 John Deere Capital Corp., 2.57%, 03/16/06, Ser. D, MTN, FRN + 2,001 1,570 Mantis Reef LTD (Australia), 4.80%, 11/03/09, # + 1,555 Merrill Lynch & Co., Inc., 1,750 2.87%, 06/13/05, Ser. B, MTN, FRN + 1,751 1,900 3.02%, 02/06/09, Ser. C, MTN, FRN + 1,905
SEE NOTES TO FINANCIAL STATEMENTS. 23
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED FINANCIAL SERVICES -- CONTINUED $ 1,815 Mizuho JGB Investment LLC, 9.87%, to 06/08; thereafter FRN, 12/31/49, # + $ 2,093 2,185 Mizuho Preferred Capital Co., LLC, 8.79%, to 06/08; thereafter FRN, 12/31/49, # + 2,446 Morgan Stanley, 4,810 2.76%, 01/12/07, FRN + 4,818 1,000 2.90%, 11/09/07, FRN + 1,000 OMX Timber Finance Investments LLC 1,480 5.42%, 01/29/20, Ser. 1, # + 1,460 2,195 5.54%, 01/29/20, Ser. 2, # + 2,166 Pricoa Global Funding I, 4,225 2.70%, 12/22/06, FRN, # + 4,235 2,595 3.90%, 12/15/08, # + 2,556 1,680 Prudential Holdings LLC, 8.70%, 12/18/23, # + 2,144 SLM Corp., 4,000 5.63%, 04/10/07, Ser. A, MTN 4,120 1,900 2.82%, 01/25/08, Ser. A, MTN, FRN + 1,898 1,428 Targeted Return Index (TRAINS), 8.21%, 08/01/15, Ser. HY-2004-1, # + 1,537 1,120 UFJ Finance AEC (Aruba), 6.75%, 07/15/13 1,242 ---------------------------------------------------------------------------- 88,913 ---------------------------------------------------------------------------- FOOD/BEVERAGE PRODUCTS -- 0.5% 3,100 Delhaize America, Inc., 9.00%, 04/15/31 + 4,098 HEALTH CARE/HEALTH CARE SERVICES -- 0.5% 615 Fresenius Medical Care Capital Trust II, 7.88%, 02/01/08 + 660 3,205 HCA, Inc., 5.25%, 11/06/08 + 3,217 2,000 Mariner Health Group, Inc., 9.50%, 04/01/06, Ser. B + (d) (f) * 0^^ 245 Medex, Inc., 8.88%, 05/15/13 + 281 ---------------------------------------------------------------------------- 4,158 ---------------------------------------------------------------------------- HOTELS/OTHER LODGING -- 0.1% $ 420 ITT Corp., 7.38%, 11/15/15 + $ 481 INSURANCE -- 1.5% 1,515 Arch Capital Group LTD (Bermuda), 7.35%, 05/01/34 + 1,707 2,320 Aspen Insurance Holdings LTD (Bermuda), 6.00%, 08/15/14, # + 2,326 275 AXA (France), 8.60%, 12/15/30 + 370 1,160 CNA Financial Corp., 5.85%, 12/15/14 + 1,178 1,040 Liberty Mutual Group, 7.00%, 03/15/34, # + 1,110 2,220 North Front Pass-Through Trust, 5.81%, to 12/14; thereafter FRN, 12/15/24, FRN, # + 2,237 845 Odyssey Re Holdings Corp., 7.65%, 11/01/13 + 942 1,250 Protective Life Secured Trust, 2.72%, 01/14/08, MTN, FRN + 1,249 1,700 Stingray Pass-Through Trust (Cayman Islands), 5.90%, 01/12/15, MTN, # + 1,703 ---------------------------------------------------------------------------- 12,822 ---------------------------------------------------------------------------- METALS/MINING -- 0.3% 1,465 Noranda, Inc., (Canada) (Yankee), 6.00%, 10/15/15 + 1,528 620 Peabody Energy Corp., 6.88%, 03/15/13, Ser. B + 671 ---------------------------------------------------------------------------- 2,199 ---------------------------------------------------------------------------- MULTI-MEDIA -- 0.9% 1,420 Clear Channel Communications, Inc., 5.50%, 09/15/14 + 1,402 420 Comcast Corp., 7.05%, 03/15/33 + 489 600 MediaNews Group, Inc., 6.88%, 10/01/13 + 611 720 News America Holdings, Inc., 7.75%, 12/01/45 + 884 930 Time Warner Entertainment Co., LP, 8.38%, 03/15/23 + 1,172
SEE NOTES TO FINANCIAL STATEMENTS. 24
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED MULTI-MEDIA -- CONTINUED Time Warner, Inc., $ 625 9.15%, 02/01/23 + $ 841 2,040 7.63%, 04/15/31 + 2,487 ---------------------------------------------------------------------------- 7,886 ---------------------------------------------------------------------------- OFFICE/BUSINESS EQUIPMENT -- 0.0% ^ 325 Xerox Corp., 7.63%, 06/15/13 352 OIL & GAS -- 1.0% 2,660 BP Capital Markets PLC (United Kingdom), 2.75%, 12/29/06 + 2,612 1,155 Enterprise Products Operating LP, 6.65%, 10/15/34, # + 1,248 1,205 Kerr-McGee Corp., 6.95%, 07/01/24 + 1,336 1,950 Pioneer Natural Resources Co., 5.88%, 07/15/16 + 2,033 1,095 Valero Energy Corp., 7.50%, 04/15/32 1,353 ---------------------------------------------------------------------------- 8,582 ---------------------------------------------------------------------------- PACKAGING -- 0.3% 565 Crown European Holdings SA (France), 9.50%, 03/01/11 + 636 Owens-Brockway Glass Container, Inc., 1,045 8.88%, 02/15/09 + 1,128 460 7.75%, 05/15/11 + 497 ---------------------------------------------------------------------------- 2,261 ---------------------------------------------------------------------------- PAPER/FOREST PRODUCTS -- 0.0% ^ 95 Abitibi-Consolidated, Inc. (Canada) (Yankee), 6.00%, 06/20/13 + 89 260 Georgia Pacific Corp., 7.70%, 06/15/15 + 302 ---------------------------------------------------------------------------- 391 ---------------------------------------------------------------------------- PHARMACEUTICALS -- 0.1% 550 Wyeth, 6.45%, 02/01/24 603 PIPELINES -- 0.6% Kinder Morgan Energy Partners LP, 1,245 7.40%, 03/15/31 + 1,492 $ 575 7.75%, 03/15/32 + $ 717 490 7.30%, 08/15/33 + 585 1,840 Magellan Midstream Partners LP, 5.65%, 10/15/16 + 1,865 245 Transcontinental Gas Pipeline Corp., 8.88%, 07/15/12, Ser. B + 300 245 Williams Companies, Inc., 8.13%, 03/15/12 285 ---------------------------------------------------------------------------- 5,244 ---------------------------------------------------------------------------- REAL ESTATE -- 0.5% 3,500 Socgen Real Estate Co., LLC, 7.64%, to 09/07; thereafter FRN, 12/31/49, # + 3,774 535 Westfield Capital Corp., LTD (Australia), 5.13%, 11/15/14, # 532 ---------------------------------------------------------------------------- 4,306 ---------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUST -- 0.5% 1,400 Hospitality Properties Trust, 5.13%, 02/15/15 + 1,375 iStar Financial, Inc., 1,535 6.00%, 12/15/10 + 1,597 1,620 5.15%, 03/01/12 + 1,611 ---------------------------------------------------------------------------- 4,583 ---------------------------------------------------------------------------- RETAILING -- 0.4% 3,245 Safeway, Inc., 4.13%, 11/01/08 + 3,198 SEMI-CONDUCTORS -- 0.0% ^ 340 Freescale Semiconductor, Inc., 7.13%, 07/15/14 + 371 TELECOMMUNICATIONS -- 3.0% 1,325 America Movil SA de CV (Mexico), 6.38%, 03/01/35 + 1,291 2,125 BellSouth Corp., 6.00%, 11/15/34 + 2,173 Deutsche Telekom International Finance BV (The Netherlands), 910 5.25%, 07/22/13 + 930 855 8.75%, 06/15/30 + 1,152
SEE NOTES TO FINANCIAL STATEMENTS. 25
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED TELECOMMUNICATIONS -- CONTINUED $ 495 Nextel Communications, Inc., 7.38%, 08/01/15 + $ 542 805 Qwest Corp., 9.13%, 03/15/12, # + 932 2,700 Rogers Wireless Communications, Inc. (Canada), 6.38%, 03/01/14 + 2,771 Sprint Capital Corp., 2,190 6.00%, 01/15/07 + 2,263 1,460 8.75%, 03/15/32 + 1,960 3,370 TCI Communications, Inc., 8.75%, 08/01/15 + 4,283 Telecom Italia Capital SA (Luxembourg), 1,370 4.00%, 11/15/08 + 1,347 2,365 4.00%, 01/15/10, # + 2,293 1,230 Verizon Global Funding Corp., 7.38%, 09/01/12 1,422 1,405 Verizon New York, Inc., 7.38%, 04/01/32, Ser. B 1,623 ---------------------------------------------------------------------------- 24,982 ---------------------------------------------------------------------------- TRANSPORTATION -- 0.5% 4,000 CSX Corp., 3.05%, 08/03/06, FRN + 4,002 UTILITIES -- 2.2% 1,725 Alabama Power Co., 2.80%, 12/01/06, Ser. Y + 1,693 1,395 Arizona Public Service Co., 4.65%, 05/15/15 + 1,352 Dominion Resources, Inc., 1,220 5.00%, 03/15/13 + 1,223 1,740 7.20%, 09/15/14, Ser. A + 2,003 1,990 Nisource Finance Corp., 6.15%, 03/01/13 + 2,131 1,235 Pacific Gas & Electric Co., 3.26%, 04/03/06, FRN + 1,236 Pepco Holdings, Inc., 1,430 6.45%, 08/15/12 + 1,566 435 7.45%, 08/15/32 + 527 Progress Energy, Inc., 3,120 6.85%, 04/15/12 + 3,470 785 7.00%, 10/30/31 + 891 PSEG Power LLC, $ 649 5.50%, 12/01/15 + $ 662 870 8.63%, 04/15/31 + 1,180 775 Reliant Resources, Inc., 9.50%, 07/15/13 + 872 ---------------------------------------------------------------------------- 18,806 ---------------------------------------------------------------------------- Total Corporate Notes & Bonds 299,017 (Cost $297,862) ---------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 45.7% COLLATERALIZED MORTGAGE OBLIGATIONS -- 20.1% 20,820 ABN Amro Mortgage Corp., 4.75%, 04/25/33, Ser. 2003-5, Class A11 + 20,774 6,115 Countrywide Alternative Loan Trust, 6.00%, 01/25/35, Ser. 2004-28CB, Class 3A1 + 6,265 16,314 Countrywide Home Loan Mortgage Pass Through Trust, 5.50%, 08/25/33, Ser. 2004-28R, Class A1 + 16,314 15,115 Countrywide Home Loans, 6.25%, 10/25/32, Ser. 2002-22, Class A20 + 15,384 7,970 CS First Boston Mortgage Securities Corp., 6.00%, 09/25/34, Ser. 2004-5, Class 1A8 + 8,040 Federal Home Loan Mortgage Corp., 5,562 4.50%, 02/15/11, Ser. 2760, Class GI, IO + 288 5,940 5.00%, 04/15/17, Ser. 2857, Class NI, IO + 431 11,248 4.56%, 10/15/18, Ser. 2779, Class SM, IO, FRN + 972 38,933 4.61%, 01/15/21, Ser. 2861, Class GS, IO, FRN + 2,093 7,895 5.00%, 04/15/22, Ser. 2751, Class AI, IO + 707 6,431 5.00%, 10/15/23, Ser. 2781, Class PI, IO + 601
SEE NOTES TO FINANCIAL STATEMENTS. 26
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED COLLATERALIZED MORTGAGE OBLIGATIONS -- CONTINUED $ 7,344 5.00%, 06/15/24, Ser. 2891, Class LI, IO + $ 805 34,100 4.46%, 02/15/34, Ser. 2813, Class SB, IO, FRN + 2,883 3,721 5.00%, 02/15/34, Ser. 2743, Class OZ + 3,721 3,454 5.00%, 12/01/34, Ser. 227, Class IO, IO + 893 Federal National Mortgage Association, 2,500 4.50%, 09/25/22, Ser. 2003-18, Class DB + 2,505 1,470 4.50%, 11/25/22, Ser. 2003-19, Class JP + 1,471 8,908 5.00%, 11/25/30, Ser. 2004-87, Class JI, IO + 1,146 13,249 4.45%, 10/25/31, Ser. 2004-61, Class TS, IO, FRN + 886 21,154 5.00%, 01/01/34, Ser. 347, Class 2, IO + 5,150 67,257 5.00%, 07/25/34, Ser. 353, Class 2, IO + 17,067 9,737 5.50%, 11/01/34, Ser. 354, Class 2, IO + 2,299 Government National Mortgage Association, 2,931 5.50%, 04/20/25, Ser. 2004-46, Class IH, IO + 207 4,465 5.50%, 01/20/27, Ser. 2004-39, Class IM, IO + 383 7,007 5.50%, 10/20/27, Ser. 2004-44, Class PK, IO + 747 3,000 Granite Mortgages PLC (United Kingdom), 2.61%, 09/20/44, Ser. 2004-3, Class 1A3, FRN + 3,001 8,415 GSMPS Mortgage Loan Trust, 2.94%, 01/25/35, Ser. 2005-RP1, Class 1AF, FRN, # + 8,408 1,393 Impac CMB Trust, 2.97%, 03/25/35, Ser. 2004-10, Class 2A, FRN + 1,392 $ 4,847 Impac Secured Assets Corp., 3.05%, 12/25/34, Ser. 2004-3, Class 1A4, FRN + $ 4,849 5,632 Indymac Index Mortgage Loan Trust, 3.09%, 09/25/34, Ser. 2004-AR7, Class A1, FRN + 5,632 2,325 Medallion Trust (Australia), 3.00%, 05/25/35, Ser. 2004-1G, Class A1, FRN + 2,327 2,500 Permanent Financing PLC (United Kingdom), 2.53%, 03/10/09, Ser. 4, Class 2A, FRN + 2,501 RESI Finance LP (Cayman Islands), 3,892 4.14%, 07/10/35, Ser. 2003-B, Class B3, FRN, # + 3,962 6,659 3.99%, 09/10/35, Ser. 2003-C, Class B3, FRN, # + 6,775 1,275 4.19%, 09/10/35, Ser. 2003-C, Class B4, FRN, # + 1,297 6,334 3.89%, 12/10/35, Ser. 2003-D, Class B3, FRN, # + 6,358 2,071 4.09%, 12/10/35, Ser. 2003-D, Class B4, FRN, # + 2,079 2,369 RMAC (United Kingdom), 2.58%, 12/12/20, Ser. 2004-NS1A, Class A1B, FRN, # + 2,369 879 SACO I, Inc., 7.00%, 08/25/36, Ser. 1997-2, Class 1A5, # + 880 Washington Mutual, Inc., 1,032 5.75%, 01/25/33, Ser. 2002-S8, Class 1A1 1,031 2,812 2.98%, 01/25/45, Ser. 2005-AR2, Class 2A21, FRN 2,815 ---------------------------------------------------------------------------- 167,708 ---------------------------------------------------------------------------- MORTGAGE BACKED PASS-THROUGH SECURITIES -- 25.6% 31,585 Federal Home Loan Mortgage Corp., 5.00%, 03/15/35, TBA 31,161
SEE NOTES TO FINANCIAL STATEMENTS. 27
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED MORTGAGE BACKED PASS-THROUGH SECURITIES -- CONTINUED Federal National Mortgage Association, $ 8,300 6.00%, 03/25/34, TBA $ 8,513 37,800 5.00%, 04/25/34, TBA 37,162 737 6.00%, 01/01/35, Pool 808949 + 756 113,000 5.00%, 03/25/35, TBA 111,340 25,000 Government National Mortgage Association, 5.50%, 03/15/35, TBA 25,391 ---------------------------------------------------------------------------- 214,323 ---------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 382,031 (Cost $383,025) ---------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 2.2% 2,500 Calwest Industrial Trust, 2.97%, 02/15/12, Ser. 2002-CALW, Class AFL, FRN, # + 2,506 4,000 GS Mortgage Securities Corp. II, 6.73%, 02/10/16, Ser. 2001-LIBA, Class E, # + (i) 4,333 11,400 Wachovia Bank Commercial Mortgage Trust, 3.96%, 12/15/35, Ser. 2003-C9, Class A2 11,251 ---------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 18,090 (Cost $17,853) ---------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 23.7% 7,829 American Express Credit Account Master Trust, 3.09%, 02/15/12, Ser. 2004-C, Class C, FRN, # + 7,853 AmeriCredit Automobile Receivables Trust, 2,065 2.75%, 10/06/07, Ser. 2003-CF, Class A3 + 2,059 5,175 2.81%, 12/06/07, Ser. 2003-DM, Class A3B, FRN + 5,182 980 2.98%, 07/06/09, Ser. 2004-DF, Class A3 + 963 3,300 3.48%, 05/06/10, Ser. 2003-CF, Class A4 + 3,282 $ 2,790 2.84%, 08/06/10, Ser. 2003-DM, Class A4 + $ 2,744 4,595 Capital Auto Receivables Asset Trust, 1.96%, 01/15/09, Ser. 2003-2, Class A4A + 4,453 Capital One Auto Finance Trust, 1,140 3.18%, 09/15/10, Ser. 2003-B, Class A4 + 1,120 3,250 2.69%, 03/15/11, Ser. 2004-A, Class A4, FRN + 3,255 Capital One Master Trust, 3,930 3.39%, 08/15/08, Ser. 2000-4, Class C, FRN, # + 3,943 6,480 4.60%, 08/17/09, Ser. 2001-8A, Class A + 6,554 Capital One Multi-Asset Execution Trust, 9,580 3.84%, 12/15/10, Ser. 2003-A, FRN, + 9,884 7,340 3.65%, 07/15/11, Ser. 2003-A4, Class A4 + 7,209 CARSS Finance LP (Cayman Islands), 726 2.87%, 01/15/11, Ser. 2004-A, Class B1, FRN, # + 726 1,209 3.54%, 01/15/11, Ser. 2004-A, Class B2, FRN, # + 1,215 4,660 Citibank Credit Card Issuance Trust, 3.51%, 03/20/08, Ser. 2003-C2, Class C2, FRN + 4,694 Citigroup Mortgage Loan Trust, Inc., 2,989 3.03%, 12/25/33, Ser. 2003-HE3, Class A, FRN + 3,001 3,230 2.80%, 02/25/35, Ser. 2005-OPT1, Class A1B, FRN + 3,230 Countrywide Asset-Backed Certificates, 1,975 3.61%, 04/25/30, Ser. 2003-5, Class AF3 + 1,968 1,785 5.41%, 01/25/34, Ser. 2003-5, Class MF1 + 1,802 5,950 2.88%, 02/15/34, Ser. 2004-I, Class A, FRN + 5,968 2,759 2.70%, 02/15/34, Ser. 2004-K, Class A2, FRN + 2,764
SEE NOTES TO FINANCIAL STATEMENTS. 28
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED $ 1,320 3.15%, 03/25/34, Ser. 2004-1, Class M1, FRN + $ 1,328 1,080 3.20%, 03/25/34, Ser. 2004-1, Class M2, FRN + 1,084 1,072 2.88%, 04/25/34, Ser. 2004-BC1, Class A1, FRN + 1,072 1,584 2.93%, 04/25/34, Ser. 2004-1, Class 3A, FRN + 1,586 1,385 Daimler Chrysler Auto Trust, 2.88%, 10/08/09, Ser. 2003-A, Class A4 + 1,368 2,350 Discover Card Master Trust I, 2.61%, 05/15/10, Ser. 2004-2, Class A1, FRN + 2,350 1,000 GMAC Mortgage Corp. Loan Trust, 2.75%, 06/25/34, Ser. 2004-HE1, Class A2, FRN + 1,001 3,325 Gracechurch Card Funding PLC (United Kingdom), 2.61%, 11/16/09, Ser. 7, Class A, FRN + 3,326 2,240 GSAMP Trust, 2.99%, 11/25/34, Ser. 2004-OPT, Class A1, FRN + 2,245 8,155 Honda Auto Receivables Owner Trust, 2.48%, 07/18/08, Ser. 2003-1, Class A4 + 8,064 951 Household Automotive Trust, 4.37%, 12/17/08, Ser. 2001-3, Class A4 + 955 1,493 Household Mortgage Loan Trust, 2.95%, 01/20/34, Ser. 2004-HC1, Class A, FRN + 1,496 Long Beach Mortgage Loan Trust, 3,069 2.97%, 07/25/33, Ser. 2003-3, Class A, FRN + 3,075 2,000 3.33%, 08/25/33, Ser. 2003-4, Class M1, FRN + 2,015 3,996 2.95%, 02/25/34, Ser. 2004-1, Class A3, FRN + 4,003 2,030 3.15%, 02/25/34, Ser. 2004-1, Class M1, FRN + 2,042 1,360 3.20%, 02/25/34, Ser. 2004-1, Class M2, FRN + 1,366 $ 1,500 2.91%, 07/25/34, Ser. 2004-3, Class A3, FRN + $ 1,500 1,500 3.22%, 07/25/34, Ser. 2004-3, Class M1, FRN + 1,505 1,905 M&I Auto Loan Trust, 2.97%, 04/20/09, Ser. 2003-1, Class A4 + 1,870 2,000 MASTR Asset Backed Securities Trust, 2.88%, 12/25/34, Ser. 2005-NC1, Class A4, FRN + 2,001 3,000 MBNA Credit Card Master Note Trust, 3.74%, 12/15/13, Ser. 2001-C2, Class C2, FRN, # + 3,077 3,285 Morgan Stanley Auto Loan Trust, 2.17%, 04/15/11, Ser. 2003-HB1, Class A2 + 3,205 New Century Home Equity Loan Trust, 1,350 3.04%, 03/25/35, Ser. 2005-1, Class M1, FRN + 1,350 1,215 4.59%, 03/25/35, Ser. 2005-1, Class A2B, FRN + 1,215 Onyx Acceptance Grantor Trust, 3,130 2.66%, 05/17/10, Ser. 2003-C, Class A4 + 3,063 4,350 3.85%, 09/15/11, Ser. 2005-A, Class A4 + 4,307 Option One Mortgage Loan Trust, 1,846 3.07%, 02/25/33, Ser. 2003-1, Class A2, FRN + 1,852 1,531 2.97%, 07/01/33, Ser. 2003-5, Class A2, FRN + 1,534 5,998 PP&L Transition Bond Co., LLC, 7.15%, 06/25/09, Ser. 1999-1, Class A8 + 6,518 Residential Asset Securities Corp., 1,213 2.90%, 07/25/32, Ser. 2002-KS4, Class AIIB, FRN + 1,214 3,413 2.94%, 07/25/33, Ser. 2003-KS5, Class AIIB, FRN + 3,419 2,475 2.97%, 11/25/33, Ser. 2003-KS9, Class A2B, FRN + 2,481 1,500 2.87%, 05/25/34, Ser. 2005-KS2, Class AI2, FRN + 1,500
SEE NOTES TO FINANCIAL STATEMENTS. 29
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED SLM Student Loan Trust, $ 8,410 2.54%, 12/15/12, Ser. 2003-12, Class A2, FRN + $ 8,416 4,975 2.99%, 12/15/22, Ser. 2003-11, Class A5, # + 4,894 2,580 Triad Auto Receivables Owner Trust, 3.20%, 12/13/10, Ser. 2003-B, Class A4 + 2,534 7,000 Volkswagen Auto Loan Enhanced Trust, 1.93%, 01/20/10, Ser. 2003-1, Class A4 6,791 Wachovia Asset Securitization, Inc., 2,691 3.08%, 12/25/32, Ser. 2002-HE2, Class A, FRN 2,704 4,010 2.91%, 07/25/33, Ser. 2003-HE2, Class AII1, FRN 4,020 2,189 2.90%, 11/25/33, Ser. 2003-HE3, Class A, FRN 2,191 2,455 WFS Financial Owner Trust, 3.15%, 05/20/11, Ser. 2003-4, Class A4 2,428 ---------------------------------------------------------------------------- Total Asset Backed Securities 197,834 (Cost $198,944) ---------------------------------------------------------------------------- PRIVATE PLACEMENTS -- 2.4% CO-OP APARTMENTS -- 2.4% 4,158 180 East End Ave. Note, Secured by First Mortgage and Agreement on Co-op Apartment Building in New York City, 6.88%, 12/28/28, # + (f) (i) 4,646 734 200 East 57th St. Note, Secured by Second Mortgage and Agreement on Co-op Apartment Building in New York City, 6.72%, 01/01/13, # (f) (i) 783 10,599 200 East 57th St. Note, Secured by First Mortgage and Agreement on Co-op Apartment Building in New York City, 6.50%, 01/01/14, # + (f) (i) 11,358 $ 3,053 81 Irving Place Note, Secured by First Mortgage and Agreement on Co-op Apartment Building in New York City, 6.95%, 01/01/29, # (f) (i) $ 3,418 ---------------------------------------------------------------------------- Total Private Placements 20,205 (Cost $18,544) ---------------------------------------------------------------------------- Total Long-Term Investments 1,014,805 (Cost $1,006,911) ---------------------------------------------------------------------------- UNITS - ---------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 5.9% OPTIONS -- 0.2% 0^^ Call Option on 10 Year Treasury Note, strike price of 110.00, expiring 03/24/05 184 0^^ Call Option on Treasury Bonds, strike price of 114.00, expiring 03/24/05 19 0^^ Call Option on 10 Year Treasury Note, strike price of 114.00, expiring 05/20/05 17 9,400 Call Option on Interest Rate Swap, expiring on 05/10/05. If exercised the Fund pays floating 3 month LIBOR and receives fixed 4.21%, expiring 05/12/15, European Style 7 0^^ Put Option on 10 Year Treasury Note, strike price of 109.00, expiring 05/20/05 60 0^^ Put Option on 5 Year Treasury Note, strike price of 108.50, expiring 05/20/05 238 0^^ Put Option on 5 Year Treasury Note, strike price of 108.50, expiring 03/24/05 285 0^^ Put Option on 10 Year Treasury Note, strike price of 108.00, expiring 05/20/05 64 0^^ Put Option on Treasury Bonds, strike price of 112.00, expiring 03/24/05 35
SEE NOTES TO FINANCIAL STATEMENTS. 30
UNITS ISSUER VALUE - ---------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- CONTINUED OPTIONS -- CONTINUED 0^^ Put Option on Treasury Bonds, strike price of 112.00, expiring 05/20/05 $ 62 0^^ Put Option on Eurodollar Future, strike price of 96.63, expiring 04/15/05 107 50,000 Put Option on FNMA, 30 Year Fixed, 5.50%, TBA, strike price 100.44, expiring 05/05/05, European Style 0 60,000 Put Option on FNMA, 30 Year Fixed, 6.00%, TBA, strike price of 100.78, expiring 05/05/05, European Style 421 60,000 Put Option on Interest Rate Swap, expiring 04/28/05. If exercised the Fund pays 4.89% and receives floating 3 month LIBOR, expiring 05/03/10, European Style 0 23,700 Put Option on Interest Rate Swap, expiring on 06/06/05. If exercised the Fund pays fixed 4.35% and receives floating 3 month LIBOR, expiring 06/08/10, European Style 296 ---------------------------------------------------------------------------- Total Options 1,795 (Cost $1,726) ---------------------------------------------------------------------------- COMMERCIAL PAPER -- 2.0% ASSET BACKED SECURITIES -- 2.0% $ 6,000 Compass Securitization LLC, 2.53%, 03/16/05 + $ 5,993 10,500 Scaldis Capital LLC, 2.43%, 03/15/05 + 10,489 ---------------------------------------------------------------------------- Total Commercial Paper 16,482 (Cost $16,484) ---------------------------------------------------------------------------- SHARES - ---------------------------------------------------------------------------------------------- MONEY MARKET FUND -- 3.7% 31,127 JPMorgan Prime Money Market Fund (a) + 31,127 (Cost $31,127) ---------------------------------------------------------------------------- Total Short-Term Investments 49,404 (Cost $49,337) ---------------------------------------------------------------------------- TOTAL INVESTMENTS -- 127.2% $ 1,064,209 (COST $1,056,248) LIABILITIES IN EXCESS OF OTHER ASSETS -- (27.2)% (227,924) ---------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 836,285 ----------------------------------------------------------------------------
Percentages indicated are based on net assets. FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
- ------------------------------------------------------------------------------------------------------------------- NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 2/28/05 (USD) (DEPRECIATION) (USD) - ------------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 285 Treasury Bonds March, 2005 $ 32,232 $ 38 221 30 Day Federal Funds April, 2005 89,535 (27) 267 30 Day Federal Funds June, 2005 107,849 (78) 49 Treasury Bonds June, 2005 5,505 (41) 242 2 Year Treasury Notes June, 2005 50,189 (88) 133 5 Year Treasury Notes June, 2005 14,308 (3) 963 10 Year Treasury Notes June, 2005 105,810 (612) SHORT FUTURES OUTSTANDING (189) Euro-BUND March, 2005 (29,639) 65 (171) Eurodollar December, 2006 (40,871) 237
SEE NOTES TO FINANCIAL STATEMENTS. 31 FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
NET UNREALIZED SETTLEMENT SETTLEMENT VALUE AT APPRECIATION CONTRACTS TO SELL DATE VALUE (USD) 2/28/05 (USD) (DEPRECIATION) (USD) - --------------------------------------------------------------------------------------------------------- 10,468 EUR 3/22/05 $ 13,651 $ 13,866 $ (215) - ---------------------------------------------------------------------------------------------------------
OPTIONS
UNITS CALL OPTIONS WRITTEN VALUE - ----------------------------------------------------------------------------------------------------------------------------- (4,700) Call Option on Interest Rate Swap, expiring 05/10/05. If exercised the Fund pays 4.46% and receives floating 3 Month LIBOR, expiring 05/12/15, European Style. $ (13) (1) Call Option on 10 Year Treasury Notes, strike price of 111.00, expiring 03/24/05. (147) (3,750) Call Option on Credit default contract, expiring 03/21/05. If exercised the Fund pays quarterly payment of 53.75 (215 per annum) BPS times notional amount of General Motors Acceptance Corp., 6.875%, 08/28/12. Upon a defined credit event, Fund receives notional amount and delivers a defined deliverable obligation, expiring 03/20/10, European Style. (5) (-)^^ Call Option on 10 Year Treasury Notes, strike price of 111.00, expiring 08/26/05. (237) (-)^^ Call Option on Treasury Bonds, strike price of 115.00, expiring 03/24/05. (19) Total Call Options Written $ (421) PUT OPTIONS WRITTEN - ------------------------------------------------------------------------------------------------------------------------------ (120,000) Put Option on FNMA, 30 Year Fixed, 5.50%, TBA, strike price at 99.78, expiring 05/05/2005, European Style. $ (417) (100,000) Put Option on FNMA, 30 Year Fixed, 5.50%, TBA, strike price at 99.50, expiring 05/05/2005, European Style. (-)^^ (60,000) Put Option on FNMA, 30 Year Fixed, 6.00%, TBA, strike price at 102.44, expiring 06/06/2005, European Style. (328) (-)^^ Put Option on 5 Year Treasury Notes, strike price of 107.50, expiring 03/24/05. (119) (-)^^ Put Option on 5 Year Treasury Notes, strike price of 108.00, expiring 03/24/05. (191) (-)^^ Put Option on 5 Year Treasury Notes, strike price of 107.50, expiring 05/20/05. (131) (-)^^ Put Option on 10 Year Treasury Notes, strike price of 111.00, expiring 08/26/05. (525) (-)^^ Put Option on Treasury Bonds, strike price of 115.00, expiring 05/20/05. (250) Total Put Options Written $ (1,961) (Total premiums received on written options $2,275)
SWAP CONTRACTS
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - --------------------------------------------------------------------------------------------------------------------------------- Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Bond, 5.38%, 02/15/31, price less 110.68, the Fund receives positive, pays negative. 03/04/05 $ 4,253 $ (31) Swap - price lock with UBS AG on 30 Year FNMA, 5.00%, TBA, price less 99.83, the Fund receives positive, pays negative. 03/14/05 21,000 (269) Swap - price lock with UBS AG on 30 Year FNMA, 5.00%, TBA, price less 99.34, the Fund receives positive, pays negative. 03/14/05 19,000 (151) Swap - price lock with Lehman Brothers Special Financing on 30 Year FHLMC Gold, 5.00%, TBA, price less 99.5, the Fund receives negative, pays positive. 03/14/05 32,585 275
SEE NOTES TO FINANCIAL STATEMENTS. 32
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - --------------------------------------------------------------------------------------------------------------------------------- Swap - price lock with UBS AG on 30 Year FNMA, 4.50%, TBA, price less 97.22, the Fund receives negative, pays positive. 03/14/05 $ 100,000 $ 1,000 Swap - rate lock with Deutsche Bank AG, New York on 10 Year Forward Interest Rate Swap less 4.79%, the Fund receives positive pays negative. 03/16/15 11,065 - Swap - rate lock with Deutsche Bank AG, New York on 30 Year Forward Interest Rate Swap less 5.15%, the Fund pays positive, receives negative. 03/16/35 7,215 - Swap - price lock with Deutsche Bank AG, New York, on U.S. Treasury Bond, 8.75%, 05/15/20, price less 144.69, the Fund receives negative, pays positive. 03/15/05 22,450 191 Swap - price lock with Citibank, N.A., on U.S. Treasury Note, 3.50%, 12/15/09, price less 98.39, the Fund receives positive, pays negative. 03/22/05 18,400 (109) Swap - rate lock with Goldman Sachs on 30 Year Forward Interest Rate Swap less 5.07%, the Fund receives negative, pays positive. 03/31/35 7,150 (94) Swap - rate lock with Goldman Sachs on 10 Year Forward Interest Rate Swap less 4.65%, the Fund receives positive, pays negative. 03/31/15 10,750 94 Swap - rate lock with Lehman Brothers Special Financing on 10 Year Forward Interest Rate Swap less 4.79%, the Fund receives positive, pays negative. 04/01/15 10,335 - Swap - price lock with Deutsche Bank AG, New York on U.S. Treasury Bond, 8.75%, 08/15/20, price less 147.60, the Fund receives positive, pays negative. 03/31/05 29,075 (1,065) Swap - rate lock with Lehman Brothers Special Financing on 30 Year Forward Interest Rate Swap less 5.15%, the Fund receives negative, pays positive. 04/01/35 7,295 - Swap - price lock with Barclays Bank PLC on U.S. Treasury Note, 4.25%, 08/15/14, price less 99.54, the Fund receives negative, pays positive. 03/30/05 8,975 - Swap - price lock with Barclays Bank PLC on U.S. Treasury Inflation Instrument, 3.38%, 01/15/07, price less 127.02, the Fund receives negative, pays positive. 03/30/05 24,365 - Swap - price lock with Barclays Bank PLC on U.S. Treasury Note, 2.25%, 02/15/07, price less 97.62, the Fund receives positive, pays negative. 03/30/05 29,865 - Swap - price lock with Deutsche Bank AG, New York on U.S. Treasury Bond, 8.50%, 02/15/20, price less 144.00, the Fund receives negative, pays positive. 03/31/05 30,270 1,071 Total Return/Spread Swap with Bank of America, N.A., on Bank of America LLC 10 Year AAA CMBS Index. The Fund receives positive when spread tightens, pays negative when spread widens. 03/31/05 51,000 65 Total Return/Spread Swap with Lehman Brothers Special Financing, N.A., on Lehman Brothers 8.5 Year AAA CMBS Index. The Fund receives positive when spread tightens, pays negative when spread widens. 04/01/05 39,000 19 Swap - price lock with Deutsche Bank AG, New York on FHMLC, 4.50%, 01/15/14, price less 100.45, the Fund receives positive, pays negative. 04/05/05 10,495 (78)
SEE NOTES TO FINANCIAL STATEMENTS. 33
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - --------------------------------------------------------------------------------------------------------------------------------- Swap - price lock with with Citibank N.A., on 30 Year FNMA, 5.50%, TBA, price less 101.63, the Fund receives positive, pays negative. 04/13/05 $ 90,000 $ (731) Swap - price lock with UBS AG on 30 Year FNMA, 6.00%, TBA, price less 102.69, the Fund receives positive, pays negative. 04/13/05 146,000 (411) Swap - price lock with UBS AG on 30 Year FNMA, 5.50%, TBA, price less 100.91, the Fund receives negative, pays positive. 04/13/05 73,000 - Swap - price lock with with Deutsche Bank AG, New York on 30 Year FNMA, 5.50%, TBA, price less 100.88, the Fund receives positive, pays negative. 04/06/05 100,000 - Swap - price lock with UBS AG on 30 Year FNMA, 5.50%, TBA, price less 100.91, the Fund pays negative, receives positive. 04/13/05 100,000 - Swap - price lock with UBS AG on 30 Year FNMA, 6.50%, TBA, price less 104.22, the Fund receives negative, pays positive. 04/13/05 73,000 148 Swap - price lock with with Deutsche Bank AG, New York on 30 Year FNMA, 6.50%, TBA, price less 104.30, the Fund receives negative, pays positive. 04/06/05 100,000 296 Swap - price lock with with Citibank N.A., on 30 Year FNMA, 4.50%, TBA, price less 97.63, the Fund receives negative, pays positive. 04/13/05 58,000 825 Swap - rate lock with Merrill Lynch Capital Services, on 30 Year Forward Interest Rate Swap less 5.14%, the Fund receives negative, pays positive. 04/11/35 9,005 (33) Swap - rate lock with Citibank N.A., on 5 Year Forward Interest Rate Swap less 4.25%, the Fund pays negative, receives positive. 04/11/10 30,910 264 Swap - rate lock with Citibank N.A., on 30 Year Forward Interest Rate Swap less 5.28%, the Fund pays positive, receives negative. 04/11/35 9,105 161 Swap - rate lock with Merrill Lynch Capital Services, on 5 Year Forward Interest Rate Swap less 4.20%, the Fund receives positive, pays negative. 04/11/10 31,025 345 Swap - price lock with with Morgan Stanley Capital Services, on 30 Year FNMA, 6.00%, 04/15/05, price less 102.89, the Fund receives positive, pays negative. 04/11/05 280,000 (1,367) Swap - price lock with with Morgan Stanley Capital Services, on 30 Year FNMA, 6.50%, 04/15/05, price less 104.38, the Fund receives negative, pays positive. 04/11/05 140,000 547 Swap - price lock with Morgan Stanley Capital Services, on 30 Year FNMA, 5.50%, 04/15/05, price less 101.27, the Fund receives negative, pays positive. 04/11/05 140,000 919 Swap - price lock with Lehman Brothers Special Financing, on 30 Year FHLMC, 6.25%, 07/15/32, price less 116.19, the Fund receives positive, pays negative. 04/15/05 6,815 16 Swap - rate lock with Goldman Sachs, on 2 Year Forward Interest Rate Swap less 3.84%, the Fund receives negative, pays positive. 04/20/07 108,955 (456) Swap - rate lock with Goldman Sachs, on 20 Year Forward Interest Rate Swap less 4.94%, the Fund receives negative, pays positive. 04/20/25 16,257 (345) Swap - rate lock with Goldman Sachs, on 7 Year Forward Interest Rate Swap less 4.40%, the Fund receives positive, pays negative. 04/20/12 69,178 884 Swap - rate lock with Credit Suisse First Boston, on 30 Year Forward Interest Rate Swap less 4.93%, the Fund receives negative, pays positive. 05/03/35 8,905 (326)
SEE NOTES TO FINANCIAL STATEMENTS. 34
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - --------------------------------------------------------------------------------------------------------------------------------- Swap - rate lock with Credit Suisse First Boston, on 5 Year Forward Interest Rate Swap less 4.17%, the Fund receives positive, pays negative. 05/03/10 $ 31,105 $ 410 Swap - Forward Rate Agreement with Citibank N.A., the Fund pays 1 month LIBOR, receives 2.83%. 05/03/05 1,248,580 (214) Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund receives 2.83%, pays 1 month LIBOR. 05/03/05 1,659,320 (207) Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund receives 3.11%, pays 1 month LIBOR. 07/01/05 2,595,845 (555) Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund receives 3.42%, pays 3 Month LIBOR. 03/15/06 347,000 (469) Credit default contract with Lehman Brothers Special Financing. Fund receives quarterly payment of 25.7925 (103.17 per annum) BPS times notional amount of General Motors Acceptance Corp., 6.875%, 08/28/12. Upon a defined credit event, Fund pays notional amount and takes receipt of a defined deliverable obligation. 03/20/06 4,200 9 Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund receives 3 Month LIBOR, pays 4.24%. 06/21/06 620,885 151 Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund receives 3 Month LIBOR, pays 3.96%. 03/21/07 347,000 346 Credit default contract with Morgan Stanley Capital Services. Fund pays semi-annual payment of 47.5 (95 per annum) BPS times notional amount of Russian Federation, 5.00%, 03/31/30, SUB. Upon a defined credit event, Fund receives notional amount and delivers a defined deliverable obligation. 12/20/06 31,000 (226) Credit default contract with Morgan Stanley Capital Services. Fund receives semi-annual payment of 87.50 (175 per annum) BPS times notional amount of Gazprom, 7.201%-10.500%, 04/25/07-04/28/34. Upon a defined credit event, Fund pays notional amount and takes receipt of defined deliverable obligation. 12/20/06 31,000 469 Credit default contract with Lehman Brothers Special Financing. Fund receives quarterly payment of 36.575 (146.30 per annum) BPS times notional amount of General Motors Acceptance Corp., 6.875%, 08/28/12. Upon a defined credit event, Fund pays notional amount and takes receipt of a defined deliverable obligation. 03/20/07 4,200 12 Credit default contract with Deutsche Bank AG, New York. Fund pays semi-annual payment of 61.5 (123 per annum) BPS times notional amount of Russian Federation, 5.00%, 03/31/30, SUB. Upon a defined credit event, Fund receives notional amount and delivers a defined deliverable obligation. 02/20/10 30,000 (129) Credit default contract with Deutsche Bank AG, New York. Fund receives semi-annual payment of 63 (126 per annum) BPS times notional amount of Aries Vermoegensverwaltungs, 7.75%-9.60%, 10/25/07-10/25/14. Upon a defined credit event, Fund pays notional amount and takes receipt of a defined deliverable obligation. 02/20/10 30,000 143 Swap - Interest Rate Swap with Merrill Lynch Capital Services, the Fund pays 4.60% semi-annually, receives 3 Month LIBOR. 01/21/15 10,305 101 Swap - Interest Rate Swap with Lehman Brothers Special Financing, the Fund pays 5.14% semi-annually, receives 3 Month LIBOR. 07/15/32 7,365 (50)
SEE NOTES TO FINANCIAL STATEMENTS. 35 JPMORGAN ENHANCED INCOME FUND PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2005 (Amounts in thousands)
SHARES ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 97.0% PREFERRED STOCKS -- 0.8% FINANCIAL SERVICES -- 0.8% 0^^ Lehman CR-ABN Amro VIX, 0.00%, Ser. MM-14 $ 900 1 Zurich RegCaps Funding Trust, 3.33%, AR, # 679 ---------------------------------------------------------------------------- Total Preferred Stocks 1,579 (cost $1,576) ---------------------------------------------------------------------------- PRINCIPAL AMOUNT (USD) - ---------------------------------------------------------------------------------------------- STATE AND MUNICIPAL OBLIGATIONS -- 0.5% ILLINOIS -- 0.5% $ 1,000 Illinois State, Taxable Pension, GO, 2.50%, 06/01/08 949 (Cost $999) CORPORATE NOTES & BONDS -- 45.2% AUTOMOTIVE -- 5.2% 1,100 American Honda Finance Corp., 2.80%, 10/22/07, MTN, FRN, # + 1,100 DaimlerChrysler N.A. Holding Corp., 600 6.40%, 05/15/06 618 1,850 3.47%, 05/24/06, MTN, FRN 1,859 2,200 3.15%, 11/17/06, Ser. D, MTN, FRN 2,202 600 Ford Motor Credit Co., 6.88%, 02/01/06 614 General Motors Acceptance Corp., 420 6.75%, 01/15/06 429 1,650 3.56%, 01/16/07, MTN, FRN 1,637 2,450 3.61%, 07/16/07, FRN 2,423 ---------------------------------------------------------------------------- 10,882 ---------------------------------------------------------------------------- BANKING -- 10.1% 1,750 Allied Irish Banks PLC (Ireland), 3.54%, to 07/08; thereafter FRN, 12/31/49, # 1,778 3,300 Banco Santander Chile (Chile), 2.80%, 12/09/09, FRN, # + 3,274 500 Capital One Bank, 6.88%, 02/01/06 514 700 Hana Bank (South Korea), 3.35%, 09/29/06, Ser. E, MTN, FRN 706 1,300 ING Bank NV (The Netherlands), 2.89%, 10/14/14, MTN, FRN 1,296 $ 1,550 KeyCorp, 2.89%, 07/23/07, Ser. G, MTN, FRN $ 1,551 National Australia Bank LTD. (Australia), 1,600 2.97%, 03/12/13, MTN, FRN 1,610 700 3.24%, 08/29/13, MTN, FRN 703 1,000 2.83%, 06/23/14, MTN, FRN 1,002 1,150 Sovereign Bancorp, Inc., 3.20%, 08/25/06, FRN 1,150 5,000 TD North America LP, 3.00%, 04/23/09, FRN, # 4,995 2,400 Westpac Banking Corp. (Australia), 2.93%, 05/25/07, FRN, # 2,402 ---------------------------------------------------------------------------- 20,981 ---------------------------------------------------------------------------- CONSUMER PRODUCTS -- 0.8% 1,650 Clorox Co., 2.54%, 12/14/07, FRN, # 1,650 FINANCIAL SERVICES -- 18.8% 4,300 CIT Group, Inc., 2.99%, 02/15/07, MTN, FRN + 4,304 Countrywide Home Loans, Inc., 500 2.89%, 06/02/06, Ser. L, MTN, FRN 502 3,900 3.05%, 11/16/07, Ser. M, MTN, FRN 3,907 Counts Trusts, 1,400 3.57%, 08/15/07, Ser. 2002-10, FRN, # + (i) 1,409 1,400 3.62%, 08/15/07, Ser. 2002-11, FRN, # + (i) 1,411 5,900 Goldman Sachs Group, Inc., 2.65%, 03/30/07, Ser. B, MTN, FRN 5,901 3,100 Household Finance Corp., 2.85%, 07/27/07, MTN, FRN 3,107 1,030 International Lease Finance Corp., 4.00%, 01/17/06, Ser. O, MTN 1,033 2,950 Lehman Brothers Holdings, Inc., 2.79%, 04/20/07, Ser. G, MTN, FRN 2,952 Morgan Stanley Group, Inc., 1,200 2.92%, 02/15/07, MTN, FRN 1,201 500 2.83%, 07/27/07, FRN 500 600 2.80%, 01/18/08, Ser. F, MTN, FRN 601 1,250 Morgan Stanley, 2.90%, 11/09/07, FRN 1,251 2,900 Sigma Finance, Inc., 2.36%, 09/15/06, MTN, FRN, # 2,898
SEE NOTES TO FINANCIAL STATEMENTS. 36
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED FINANCIAL SERVICES -- CONTINUED $ 5,500 Special Purpose Accounts Receivable Cooperative Corp., 3.06%, 11/21/07, Ser. 2004-4, FRN, # (i) $ 5,499 1,200 Twin Reefs Pass-Through Trust, 3.59%, to 12/09; thereafter FRN, 12/31/49, # 1,204 1,550 Two-Rock Pass-Through (Bermuda), 3.71%, to 02/10; thereafter FRN, 12/31/49, # 1,560 ---------------------------------------------------------------------------- 39,240 ---------------------------------------------------------------------------- INSURANCE -- 3.2% 2,400 ASIF Global Financing, 2.73%, 03/14/08, FRN, # + 2,400 2,350 Genworth Financial, Inc., 2.64%, 06/15/07, FRN 2,351 1,950 Oil Insurance LTD (Bermuda), 2.74%, 04/07/06, FRN, # + (i) 1,950 ---------------------------------------------------------------------------- 6,701 ---------------------------------------------------------------------------- OIL & GAS -- 0.5% 970 Texas Municipal Gas Corp., 2.60%, 07/01/07, # 961 REAL ESTATE -- 1.3% 2,700 Westfield Capital Corp., LTD (Australia), 3.05%, 11/02/07, FRN, # 2,703 REAL ESTATE INVESTMENT TRUST -- 0.6% 300 Duke Realty LP, 2.78%, 12/22/06, FRN 300 850 iStar Financial, Inc., 1.00%, 03/03/08, FRN 851 ---------------------------------------------------------------------------- 1,151 ---------------------------------------------------------------------------- RETAILING -- 0.4% 750 Safeway, Inc., 3.21%, 11/01/05, FRN 751 TELECOMMUNICATIONS -- 0.9% 1,900 BellSouth Corp., 2.92%, 11/15/07, FRN + 1,900 TRANSPORTATION -- 0.5% 1,100 CSX Corp., 3.05%, 08/03/06, FRN + 1,101 UTILITIES -- 2.9% $ 900 Appalachian Power Co., 2.88%, 06/29/07, FRN + $ 901 1,000 Dominion Resources, Inc., 3.09%, 05/15/06, Ser. B, FRN 1,002 950 National Rural Utilities Cooperative Finance Corp., 2.91%, 02/17/06, MTN, FRN 951 1,199 Pacific Gas & Electric Co., 3.26%, 04/03/06, FRN 1,200 1,950 Public Service Electric & Gas, 2.66%, 06/23/06, FRN 1,950 ---------------------------------------------------------------------------- 6,004 ---------------------------------------------------------------------------- Total Corporate Notes & Bonds 94,025 (Cost $94,016) ---------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 15.7% COLLATERALIZED MORTGAGE OBLIGATIONS -- 15.7% Adjustable Rate Mortgage Trust, 2,542 3.03%, 04/25/35, Ser. 2004-5, Class 7A2, FRN + 2,545 2,748 2.98%, 05/25/35, Ser. 2005-1, Class 5A2, FRN + 2,749 1,500 Countrywide Alternative Loan Trust, 0.00%, 09/25/35, Ser. 2005-9CB, Class 1A1, FRN 1,500 248 Countrywide Home Loan Mortgage Pass Through Trust, 5.75%, 01/25/33, Ser. 2002-31, Class A3 + 251 70 Deutsche Mortgage Securities, Inc., 2.86%, 04/25/34, Ser. 2004-4, Class 1A1, FRN 70 1,079 Federal Home Loan Mortgage Corp., 4.00%, 08/15/19, Ser. 2836, Class HZ 1,074 Federal National Mortgage Association, 443 3.50%, 07/25/14, Ser. 2003-62, Class OB 443 1,782 3.05%, 02/25/28, Ser. 2003-121, Class FC, FRN 1,786 492 3.15%, 06/25/32, Ser. 2002-36, Class FS, FRN 496 733 3.15%, 06/25/32, Ser. 2002-36, Class FT, FRN 739
SEE NOTES TO FINANCIAL STATEMENTS. 37
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED COLLATERALIZED MORTGAGE OBLIGATIONS -- CONTINUED $ 4,350 Granite Mortgages PLC (United Kingdom), 2.61%, 09/20/44, Ser. 2004-3, Class 1A3, FRN $ 4,350 3,900 GSMPS Mortgage Loan Trust, 2.94%, 01/25/35, Ser. 2005-RP1, Class 1AF, FRN, # 3,896 1,705 Impac Secured Assets Corp., 3.05%, 11/25/34, Ser. 2004-3, Class 1A4, FRN 1,706 Indymac Index Mortgage Loan Trust, 2,100 3.09%, 09/25/34, Ser. 2004-AR7, Class A1, FRN 2,100 677 3.06%, 11/25/34, Ser. 2004-AR8, Class 2A1, FRN 680 3,548 Medallion Trust (Australia), 3.00%, 05/25/35, Ser. 2004-1G, Class A1, FRN 3,551 1,850 Mound Financing PLC (United Kingdom), 2.91%, 02/08/08, Ser. 3A, Class A1-1, FRN, # 1,850 283 Residential Asset Securitization Trust, 5.15%, 01/25/33, Ser. 2002-A14J, Class A2 283 1,360 RMAC (United Kingdom), 2.58%, 12/12/20, Ser. 2004-NS1A, Class A1B, FRN, # 1,360 1,298 Thornburg Mortgage Securities Trust, 2.99%, 04/25/43, Ser. 2003-2, Class A1, FRN 1,300 ---------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 32,729 (Cost $32,718) ---------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 4.2% 1,554 Calstrs Trust, 2.90%, 11/20/12, Ser. 2002-C6, Class A1, FRN, # 1,563 Calwest Industrial Trust, 2,700 2.97%, 02/15/12, Ser. 2002-CALW, Class AFL, FRN, # 2,706 859 2.86%, 06/15/15, Ser. 2003-CALA, Class A, FRN, # 861 998 CR, 6.70%, 08/10/14, Ser. 2000-ZC2, Class A4A, # + (i) 1,061 1,138 Goldman Sachs Mortgage Securities II, 2.74%, 11/15/15, Ser. 2003-FL6A, Class A1, FRN, # 1,137 $ 1,450 LB-UBS Commercial Mortgage Trust, 3.48%, 07/15/27, Ser. 2003-C5, Class A2 $ 1,412 ---------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 8,740 (Cost $8,779) ---------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 28.4% 1,450 American Express Credit Account Master Trust, 3.09%, 02/15/12, Ser. 2004-C, Class C, FRN, # + 1,454 Ameriquest Mortgage Securities, Inc., 550 3.31%, 11/25/34, Ser. 2004-R11, Class M1, FRN + 552 500 3.08%, 04/25/35, Ser. 2005-R2, Class M2, FRN 500 1,600 Capital One Master Trust, 3.39%, 08/15/08, Ser. 2000-4, Class C, FRN, # 1,605 Capital One Multi-Asset Execution Trust, 1,700 3.76%, 02/17/09, Ser. 2003-B1, Class B1, FRN 1,718 1,650 3.84%, 12/15/10, Ser. 2003-A, FRN, (i) 1,703 806 CARSS Finance LP (Cayman Islands), 2.87%, 01/15/11, Ser. 2004-A, Class B1, FRN, # 807 Centex Home Equity, 709 2.93%, 01/25/34, Ser. 2004-A, Class AV2, FRN 709 956 2.85%, 03/25/34, Ser. 2004-B, Class AV1, FRN 956 1,189 2.90%, 06/25/34, Ser. 2004-C, Class AV2, FRN 1,190 Citibank Credit Card Issuance Trust, 1,400 7.45%, 09/15/07, Ser. 2000-C1, Class C1 1,430 200 2.70%, 01/15/08, Ser. 2003-A2, Class A2 199 2,050 3.51%, 03/20/08, Ser. 2003-C2, Class C2, FRN 2,065 2,900 2.86%, 05/20/11, Ser. 2004-B1, Class B1, FRN 2,906
SEE NOTES TO FINANCIAL STATEMENTS. 38
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED $ 617 Citifinancial Mortgage Securities, Inc., 2.94%, 08/25/33, Ser. 2003-3, Class AV1, FRN $ 618 Citigroup Mortgage Loan Trust, Inc., 1,598 3.03%, 12/25/33, Ser. 2003-HE3, Class A, FRN 1,604 1,250 2.80%, 02/25/35, Ser. 2005-OPT1, Class A1B, FRN 1,250 CNH Equipment Trust, 2,130 2.73%, 01/15/08, Ser. 2003-B, Class A3A, FRN + 2,131 2,000 2.66%, 10/15/08, Ser. 2004-A, Class A3A, FRN + 2,001 Countrywide Asset-Backed Certificates, 900 3.15%, 02/25/34, Ser. 2004-BC1, Class M1, FRN + 900 500 3.10%, 11/25/34, Ser. 2004-6, Class 2A4, FRN + 500 2,738 Countrywide Home Equity Loan Trust, 2.86%, 05/15/29, Ser. 2003-C, Class A, FRN + 2,741 254 EQCC Trust, 2.95%, 11/25/31, Ser. 2002-1, Class 2A, FRN 254 1,518 Fifth Third Home Equity Loan Trust, 2.85%, 09/20/23, Ser. 2003-1, Class A, FRN 1,519 35 Fleet Credit Card Master Trust II, 2.64%, 10/15/07, Ser. 2002-A, Class A, FRN 35 1,603 Fleet Home Equity Loan Trust, 2.85%, 01/20/33, Ser. 2003-1, Class A, FRN 1,604 GE Corporate Aircraft Financing LLC, 608 2.82%, 06/25/10, Ser. 2003-1A, Class A1, FRN, # 608 3,052 2.74%, 08/25/11, Ser. 2004-1A, Class A1, FRN, # 3,052 GMAC Mortgage Corp. Loan Trust, 3,400 2.73%, 06/25/34, Ser. 2004-HE1, Class A1, FRN 3,402 950 2.84%, 03/25/35, Ser. 2004-HE4, Class A2, FRN 952 $ 333 Greenpoint Home Equity Loan Trust, 2.86%, 04/15/29, Ser. 2003-1, Class A, FRN $ 334 307 HFC Home Equity Loan Asset Backed Certificates, 2.90%, 04/20/32, Ser. 2002-2, Class A, FRN 308 200 Household Automotive Trust, 2.93%, 05/18/09, Ser. 2002-3, Class A4B, FRN 201 Household Mortgage Loan Trust, 1,060 2.95%, 02/21/33, Ser. 2003-HC1, Class A, FRN 1,063 411 2.95%, 02/20/34, Ser. 2004-HC1, Class A, FRN 411 Long Beach Mortgage Loan Trust, 208 3.11%, 11/25/32, Ser. 2002-4, Class 2A, FRN 208 2,050 3.33%, 08/25/33, Ser. 2003-4, Class M1, FRN 2,065 450 2.90%, 02/25/35, Ser. 2005-1, Class 2A2, FRN 451 1,204 Metris Master Trust, 2.88%, 04/20/11, Ser. 2004-1, Class A, FRN 1,204 550 New Century Home Equity Loan Trust, 3.27%, 11/25/34, Ser. 2004-3, Class M1, FRN 553 Option One Mortgage Loan Trust, 228 2.94%, 02/25/32, Ser. 2002-1, Class A, FRN 228 48 2.92%, 06/25/32, Ser. 2002-2, Class A, FRN 48 1,226 3.07%, 02/25/33, Ser. 2003-1, Class A2, FRN 1,230 2,300 2.89%, 02/25/35, Ser. 2005-1, Class A3, FRN 2,303 550 Park Place Securities, Inc., 3.28%, 02/25/35, Ser. 2004-WHQ2, Class M2, FRN 551 246 Residential Asset Securities Corp., 2.95%, 01/25/34, Ser. 2003-KS11, Class AIIB, FRN 246 850 Residential Funding Mortgage Securities II, 2.91%, 01/25/29, Ser. 2003-HS4, Class AIB, FRN 851
SEE NOTES TO FINANCIAL STATEMENTS. 39
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED $ 2,900 Volkswagen Auto Loan Enhanced Trust, 2.94%, 03/22/10, Ser. 2003-2, Class A4 $ 2,844 2,073 Wachovia Asset Securitization, Inc., 2.87%, 06/25/34, Ser. 2004-HE1, Class A, FRN 2,073 1,000 William Street Funding Corp., 3.04%, 01/23/11, Ser. 2005-1, Class A, FRN, # 1,000 ---------------------------------------------------------------------------- Total Asset Backed Securities 59,137 (Cost $59,176) ---------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT -- 2.2% 4,600 Deutsche Bank AG/New York (Yankee), 3.02%, 05/15/07, Floating Rate 4,598 (Cost $4,600) ---------------------------------------------------------------------------- Total Long-Term Investments 201,757 (Cost $201,864) ---------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 3.1% U.S. TREASURY SECURITY -- 0.1% 150 U.S. Treasury Bill, 2.26%, 04/14/05, @ + 150 (Cost $150) MUNICIPAL SECURITIES -- 0.7% NORTH CAROLINA -- 0.1% 200 Wake Forest University, Ser. 1997, Rev., FRDO, 2.62%, 03/02/05 200 TEXAS -- 0.6% $1,250 Texas Public Finance Authority, Taxable, Unemployment Compensation, Ser. B, Rev., 2.00%, 06/15/05 $ 1,246 ---------------------------------------------------------------------------- Total Short Term -- Municipal Securities 1,446 (Cost $1,450) ---------------------------------------------------------------------------- COMMERCIAL PAPER -- 0.5% CONSUMER PRODUCTS -- 0.5% 1,100 Altria Group, Inc., 3.00%, 05/02/05 + 1,094 (Cost $1,094) SHARES - ---------------------------------------------------------------------------------------------- MONEY MARKET FUND -- 1.8% 3,814 JPMorgan Prime Money Market Fund (a) + 3,814 (Cost $3,814) ---------------------------------------------------------------------------- Total Short-Term Investments 6,504 (Cost $6,508) ---------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.1% $ 208,261 (COST $208,372) LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.1)% (285) ---------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 207,976 ----------------------------------------------------------------------------
Percentages indicated are based on net assets. FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 2/28/05 (USD) (DEPRECIATION) (USD) - ------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 1 30 Day Federal Funds March, 2005 $ 406 $ 0^^ 82 30 Day Federal Funds April, 2005 33,221 (5) 6 2 Year Treasury Notes June, 2005 1,244 (3) 3 5 Year Treasury Notes June, 2005 323 (2)
SEE NOTES TO FINANCIAL STATEMENTS. 40 JPMORGAN EMERGING MARKETS DEBT FUND PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2005 (Amounts in thousands)
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 78.4% U.S. TREASURY SECURITY -- 0.4% UNITED STATES -- 0.4% $ 135 U.S. Treasury Note, 6.88%, 05/15/06, @ + $ 141 (Cost $143) FOREIGN GOVERNMENT SECURITIES -- 76.6% ARGENTINA -- 7.3% Republic of Argentina, 1,890 3.01%, 08/03/12, FRN 1,690 3,216 12.25%, 06/19/18, Ser. 2018 1,045 ---------------------------------------------------------------------------- 2,735 ---------------------------------------------------------------------------- BRAZIL -- 18.7% 300 Banco Nacional de Desenvolvimiento Economico e Social, 5.83%, 06/16/08, Regulation S, FRN 306 Federal Republic of Brazil, 700 11.00%, 01/11/12 840 1,298 3.13%, 04/15/12, FRN 1,254 1,245 10.25%, 06/17/13 1,444 2 8.00%, 04/15/14 2 350 12.25%, 03/06/30 455 300 11.00%, 08/17/40 347 1,985 11.00%, 08/17/40 2,298 ---------------------------------------------------------------------------- 6,946 ---------------------------------------------------------------------------- COLOMBIA -- 2.5% Republic of Colombia, COP 1,465,000 11.75%, 03/01/10 651 255 9.75%, 04/09/11 290 ---------------------------------------------------------------------------- 941 ---------------------------------------------------------------------------- ECUADOR -- 1.0% Republic of Ecuador, 69 12.00%, 11/15/12, Regulation S 70 320 8.00%, 08/15/30, Regulation S, SUB 298 ---------------------------------------------------------------------------- 368 ---------------------------------------------------------------------------- EL SALVADOR -- 0.7% Republic of El Salvador, $ 135 8.25%, 04/10/32, # $ 142 120 7.63%, 09/21/34, # 127 ---------------------------------------------------------------------------- 269 ---------------------------------------------------------------------------- MEXICO -- 4.7% United Mexican States, MXN 17,000 8.00%, 12/19/13 1,387 205 8.13%, 12/30/19 245 105 8.00%, 09/24/22, Ser. A, MTN 124 ---------------------------------------------------------------------------- 1,756 ---------------------------------------------------------------------------- PANAMA -- 1.2% Republic of Panama, 20 10.75%, 05/15/20 26 345 9.38%, 01/16/23 412 ---------------------------------------------------------------------------- 438 ---------------------------------------------------------------------------- PERU -- 4.7% Republic of Peru, 130 8.38%, 05/03/16 144 1,285 5.00%, 03/07/17, FRN 1,207 360 8.75%, 11/21/33 392 ---------------------------------------------------------------------------- 1,743 ---------------------------------------------------------------------------- RUSSIA -- 12.1% 1,750 Aries Vermoegensverwaltungs, 9.60%, 10/25/14, # 2,167 Russian Federation, 505 11.00%, 07/24/18, Regulation S 727 530 12.75%, 06/24/28, Regulation S 904 210 5.00%, 03/31/30, Regulation S, SUB, # 220 488 5.00%, 03/31/30, SUB, # 512 ---------------------------------------------------------------------------- 4,530 ---------------------------------------------------------------------------- TRINIDAD/TOBAGO -- 0.6% 155 Republic of Trinidad & Tobago, 9.75%, 07/01/20, Regulation S 215
SEE NOTES TO FINANCIAL STATEMENTS. 41
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED TURKEY -- 4.0% Republic of Turkey, $ 456 11.50%, 01/23/12 $ 589 440 11.00%, 01/14/13 564 240 11.88%, 01/15/30 347 ---------------------------------------------------------------------------- 1,500 ---------------------------------------------------------------------------- UKRAINE -- 4.6% Republic of Ukraine, 525 6.88%, 03/04/11, # 553 335 6.88%, 03/04/11, Regulation S 353 420 7.65%, 06/11/13, # 462 320 7.65%, 06/11/13, Regulation S 352 ---------------------------------------------------------------------------- 1,720 ---------------------------------------------------------------------------- URUGUAY -- 2.8% UYU 24,500 Republic of Uruguay, 17.75%, 02/04/06 1,039 ---------------------------------------------------------------------------- VENEZUELA -- 11.7% Republic of Venezuela, 2,790 10.75%, 09/19/13 3,223 1,105 9.25%, 09/15/27 1,138 ---------------------------------------------------------------------------- 4,361 ---------------------------------------------------------------------------- Total Foreign Government Securities 28,561 (Cost $25,720) ---------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 1.4% BRAZIL -- 1.0% 380 Trikem SA, 10.63%, 07/24/07, # 388 RUSSIA -- 0.4% 140 Gazprom International SA, 7.20%, 02/01/20, # 149 ---------------------------------------------------------------------------- Total Corporate Notes & Bonds 537 (Cost $509) ---------------------------------------------------------------------------- SHARES ISSUER VALUE - ---------------------------------------------------------------------------------------------- WARRANTS -- 0.0% ^ NIGERIA -- 0.0% ^ 1 Central Bank of Nigeria, expires 11/15/20* $ 0 SINGAPORE -- 0.0% ^ 0^^ Asia Pulp & Paper Co., LTD, ADR, expires 03/15/05, # * (i) (f) 0 VENEZUELA -- 0.0% ^ 1 Republic of Venezuela (Oil Obligation) (Venezuela), expires 04/15/20 * 18 ---------------------------------------------------------------------------- Total Warrants 18 (Cost $0 ^^) ---------------------------------------------------------------------------- Total Long-Term Investments 29,257 (Cost $26,372) ---------------------------------------------------------------------------- PRINCIPAL AMOUNT (USD) - ---------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENT -- 3.0% U.S. TREASURY SECURITY -- 3.0% $ 1,150 U.S. Treasury Bill, 2.90%, 08/25/05 @ + 1,134 (Cost $1,134) ---------------------------------------------------------------------------- TOTAL INVESTMENTS -- 81.4% $ 30,391 (COST $27,506) OTHER ASSETS IN EXCESS OF LIABILITIES -- 18.6% 6,925 ---------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 37,316 ----------------------------------------------------------------------------
Percentages indicated are based on net assets. SEE NOTES TO FINANCIAL STATEMENTS. 42 SUMMARY OF INVESTMENTS BY INDUSTRY, FEBRUARY 28, 2005 (percentages based on Net Assets) INDUSTRY Foreign Government Securities 76.6% U.S. Treasury Securities 3.4 Chemicals 1.0 Oil & Gas 0.4 - -------------------------------------------------------------------------------- 81.4% - --------------------------------------------------------------------------------
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 2/28/05 (USD) (DEPRECIATION) (USD) - ------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 10 10 Year Treasury Notes June, 2005 $ 1,099 $ (7) SHORT FUTURES OUTSTANDING (3) Treasury Bonds June, 2005 (337) 3
SEE NOTES TO FINANCIAL STATEMENTS. 43 JPMORGAN GLOBAL STRATEGIC INCOME FUND PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2005 (Amounts in thousands)
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 92.4% U.S. TREASURY SECURITIES -- 2.5% U.S. Treasury Notes & Bonds, $ 50 1.63%, 04/30/05 + $ 50 50 1.63%, 02/28/06 + 49 30 2.50%, 09/30/06 + 30 100 3.00%, 12/31/06 + 99 110 3.13%, 01/31/07 + 109 110 6.63%, 05/15/07 @ + 117 65 3.63%, 01/15/10 + 64 90 3.50%, 02/15/10 + 88 178 4.25%, 11/15/14 + 176 85 4.00%, 02/15/15 + 83 125 5.50%, 08/15/28 @ + 137 140 5.38%, 02/15/31 + 154 ---------------------------------------------------------------------------- Total U.S. Treasury Securities 1,156 (Cost $1,151) ---------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY SECURITIES -- 0.6% Federal Home Loan Mortgage Corp., 15 5.75%, 01/15/12 16 110 6.75%, 03/15/31 136 80 Federal National Mortgage Association, 7.13%, 01/15/30 103 ---------------------------------------------------------------------------- Total U.S. Government Agency Securities 255 (Cost $238) ---------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 22.5% Dominican Republic (Dominican Republic), 113 9.50%, 09/27/06, Regulation S 108 Federal Republic of Brazil (Brazil), 70 11.25%, 07/26/07 80 60 11.50%, 03/12/08 + 70 25 11.00%, 01/11/12 30 150 3.13%, 04/15/12, FRN 145 250 10.25%, 06/17/13 290 190 11.00%, 08/17/40 220 Federal Republic of Germany (Germany), EUR 270 5.25%, 01/04/08, Ser. 98 + 382 EUR 120 3.50%, 10/10/08, Ser. 143 + 162 EUR 100 3.25%, 04/17/09, Ser. 144 + 134 EUR 100 4.50%, 01/04/13, Ser. 03 + 141 EUR 50 6.25%, 01/04/24, Ser. 94 + 85 EUR 330 4.75%, 07/04/34, Ser. 03 + 481 Government of Canada (Canada), CAD 20 7.00%, 12/01/06 + $ 17 CAD 40 5.50%, 06/01/10 + 35 CAD 25 8.00%, 06/01/27, Ser. VW17 + 29 Government of France (France), EUR 35 5.50%, 04/25/07 + 49 EUR 20 4.00%, 04/25/13 + 27 EUR 40 4.00%, 04/25/14 + 54 EUR 70 5.00%, 10/25/16 + 103 EUR 15 5.75%, 10/25/32 25 EUR 105 Kingdom of Belgium (Belgium), 4.25%, 09/28/13, Ser. 41 + 145 240 Malaysia Government International Bond (Malaysia), 7.50%, 07/15/11 274 EUR 105 Netherlands Government Bond (The Netherlands), 3.00%, 07/15/07 + 140 250 Province of Ontario (Canada), 6.00%, 02/21/06 256 Province of Quebec (Canada), 100 6.13%, 01/22/11, Ser. PJ 108 50 7.50%, 09/15/29 66 Republic of Colombia (Colombia), 250 9.75%, 04/23/09, Ser. NOV 280 82 9.75%, 04/09/11 94 50 10.75%, 01/15/13 58 50 8.25%, 12/22/14 51 135 11.75%, 02/25/20, MTN 170 25 Republic of Egypt (Egypt), 8.75%, 07/11/11, Regulation S 30 Republic of El Salvador (El Salvador), 38 8.50%, 07/25/11, Regulation S 43 230 8.25%, 04/10/32, # 242 20 7.63%, 09/21/34, # 21 Republic of Italy (Italy), 250 2.50%, 03/31/06, MTN 248 150 3.63%, 09/14/07 148 Republic of Panama (Panama), 140 9.63%, 02/08/11 166 165 10.75%, 05/15/20 215 115 9.38%, 01/16/23 137
SEE NOTES TO FINANCIAL STATEMENTS. 44
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED FOREIGN GOVERNMENT SECURITIES -- CONTINUED Republic of Peru (Peru), $ 25 9.88%, 02/06/15 $ 30 360 8.38%, 05/03/16 397 337 4.50%, 03/07/17, FRN 315 51 5.00%, 03/07/17, FRN 48 30 8.75%, 11/21/33 33 Republic of South Africa (South Africa) (Yankee), 40 9.13%, 05/19/09 47 205 8.50%, 06/23/17 257 20 Republic of Trinidad & Tobago (Trinidad & Tobago), 9.75%, 07/01/20, Regulation S 28 Republic of Turkey (Turkey), 120 11.50%, 01/23/12 155 55 11.00%, 01/14/13 71 50 11.88%, 01/15/30 72 Republic of Ukraine (Ukraine), 250 6.88%, 03/04/11, # 263 360 7.65%, 06/11/13, Regulation S 397 Republic of Venezuela (Venezuela), 625 10.75%, 09/19/13 723 65 7.00%, 12/01/18, Regulation S 59 160 9.25%, 09/15/27 165 Russian Federation (Russia), 100 10.00%, 06/26/07, Regulation S 112 5 11.00%, 07/24/18, Regulation S 7 145 12.75%, 06/24/28, Regulation S 247 547 5.00%, 03/31/30, Regulation S, SUB 574 U.K. Treasury Gilt (United Kingdom), GBP 10 8.50%, 12/07/05 20 GBP 30 5.00%, 03/07/08 58 GBP 40 5.75%, 12/07/09 80 GBP 10 8.00%, 09/27/13 23 GBP 15 4.75%, 09/07/15 29 GBP 15 6.00%, 12/07/28 35 United Mexican States (Mexico), 125 6.38%, 01/16/13, MTN 132 120 6.63%, 03/03/15 129 35 8.13%, 12/30/19 42 20 11.50%, 05/15/26 31 155 8.30%, 08/15/31, MTN 187 53 7.50%, 04/08/33, Ser. A, MTN 58 ---------------------------------------------------------------------------- Total Foreign Government Securities 10,383 (Cost $9,371) ---------------------------------------------------------------------------- SUPRANATIONAL NOTES & BONDS -- 0.5% $ 200 Inter-American Development Bank, 7.38%, 01/15/10 $ 228 (Cost $203) CORPORATE NOTES & BONDS -- 36.5% ADVERTISING -- 0.3% 50 RH Donnelley Corp., 6.88%, 01/15/13, # 51 30 RH Donnelley Finance Corp. I, 10.88%, 12/15/12, # 35 50 Vertis, Inc., 9.75%, 04/01/09 54 ---------------------------------------------------------------------------- 140 ---------------------------------------------------------------------------- AEROSPACE -- 0.4% 15 General Dynamics Corp., 2.13%, 05/15/06 15 140 L-3 Communications Corp., 7.63%, 06/15/12 153 ---------------------------------------------------------------------------- 168 ---------------------------------------------------------------------------- AGRICULTURAL PRODUCTION/SERVICES -- 0.1% 30 RJ Reynolds Tobacco Holdings, Inc., 7.88%, 05/15/09, Ser. B 33 AIRLINES -- 0.3% 132 Northwest Airlines Corp., 8.07%, 10/01/19, Ser. 2000-1 146 APPAREL -- 0.1% 60 Russell Corp., 9.25%, 05/01/10 65 APPLIANCES & HOUSEHOLD DURABLES -- 0.1% 45 Gregg Appliances, Inc., 9.00%, 02/01/13, # 44 AUTOMOTIVE -- 2.1% 10 DaimlerChrysler N.A. Holding Corp., 7.20%, 09/01/09 11 Ford Motor Credit Co., 330 7.38%, 10/28/09 345 65 4.05%, 01/15/10, FRN 65 70 7.88%, 06/15/10 75 15 7.00%, 10/01/13 15
SEE NOTES TO FINANCIAL STATEMENTS. 45
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED AUTOMOTIVE -- CONTINUED General Motors Acceptance Corp., $ 35 6.13%, 09/15/06 $ 36 35 6.75%, 12/01/14 34 General Motors Corp., 25 7.20%, 01/15/11 25 10 8.25%, 07/15/23 10 160 8.38%, 07/15/33 157 Tenneco Automotive, Inc., 30 10.25%, 07/15/13, Ser. B 35 35 8.63%, 11/15/14, # 37 TRW Automotive, Inc., 22 9.38%, 02/15/13 25 97 11.00%, 02/15/13 114 ---------------------------------------------------------------------------- 984 ---------------------------------------------------------------------------- BANKING -- 1.5% 75 Abbey National Capital Trust I, 8.96%, to 6/30; thereafter FRN, 12/31/49 + 107 165 ABN-Amro North American Holding Preferred Capital Repackage Trust I, 6.52%, to 11/12; thereafter FRN, 12/31/49, # + 181 20 ANZ Capital Trust II, 5.36%, 12/31/49, # + 20 10 Cadets Trust, 4.80%, 07/15/13, Ser. 2003-1, # 10 15 HBOS Treasury Services PLC (United Kingdom), 3.60%, 08/15/07, MTN, # 15 15 Industrial Bank of Korea (South Korea), 4.00%, to 05/09; thereafter FRN, 05/19/14, # 15 10 KBC Bank Fund Trust III, 9.86%, to 11/09; thereafter FRN, 11/29/49, # 12 15 Popular North America, Inc., 4.70%, 06/30/09 15 RBS Capital Trust I, 5 6.43%, to 1/34; thereafter FRN, 12/29/49 5 285 5.51%, to 9/14; thereafter FRN, 12/31/49 291 20 SunTrust Bank, 2.50%, 11/01/06 20 5 Swedbank (Sweden), 9.00%, to 03/10; thereafter FRN, 12/31/49, # 6 ---------------------------------------------------------------------------- 697 ---------------------------------------------------------------------------- BIOTECHNOLOGY -- 0.1% $ 45 Bio-Rad Laboratories, Inc., 7.50%, 08/15/13 $ 49 BROADCASTING/CABLE -- 0.6% 145 Cablevision Systems Corp., 8.00%, 04/15/12, # + 164 Echostar DBS Corp., 110 6.38%, 10/01/11 113 15 6.63%, 10/01/14, # 15 ---------------------------------------------------------------------------- 292 ---------------------------------------------------------------------------- BUSINESS SERVICES -- 0.1% 10 Cendant Corp., 7.13%, 03/15/15 11 50 Iron Mountain, Inc., 8.63%, 04/01/13 53 ---------------------------------------------------------------------------- 64 ---------------------------------------------------------------------------- CHEMICALS -- 1.3% 10 Albemarle Corp., 5.10%, 02/01/15 + 10 80 Crompton Corp., 9.88%, 08/01/12 90 30 Huntsman International LLC, 9.88%, 03/01/09 33 Huntsman LLC, 55 11.63%, 10/15/10 66 25 11.50%, 07/15/12, # 30 15 ICI Wilmington, Inc., 5.63%, 12/01/13 15 3 IMC Global, Inc., 10.88%, 06/01/08, Ser. B 4 Lyondell Chemical Co., 10 9.63%, 05/01/07, Ser. A 11 115 10.88%, 05/01/09 120 3 Millennium America, Inc., 9.25%, 06/15/08 3 120 Nalco Co., 7.75%, 11/15/11 129 75 PolyOne Corp., 10.63%, 05/15/10 86 5 The Dow Chemical Co., 7.38%, 11/01/29 6 ---------------------------------------------------------------------------- 603 ---------------------------------------------------------------------------- CONSTRUCTION -- 1.0% Ainsworth Lumber Co. LTD (Canada), 65 7.25%, 10/01/12, # + 67 20 6.75%, 03/15/14 + 20
SEE NOTES TO FINANCIAL STATEMENTS. 46
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED CONSTRUCTION -- CONTINUED Beazer Homes USA, Inc., $ 45 8.38%, 04/15/12 + $ 49 35 6.50%, 11/15/13 + 36 80 D.R. Horton, Inc., 9.38%, 03/15/11 87 100 KB Home, 8.63%, 12/15/08 113 20 Meritage Homes Corp., 6.25%, 03/15/15, # 20 Pulte Homes, Inc., 10 5.25%, 01/15/14 10 75 6.38%, 05/15/33 76 ---------------------------------------------------------------------------- 478 ---------------------------------------------------------------------------- CONSUMER PRODUCTS -- 0.4% 25 ALH Finance LLC / ALH Finance Corp., 8.50%, 01/15/13, # 26 311 Drypers Corp., 10.25%, 06/15/07, Ser. B (d) (f) * 3 55 Elizabeth Arden, Inc., 7.75%, 01/15/14 59 70 Playtex Products, Inc., 8.00%, 03/01/11 76 5 Sealy Mattress, Co., 8.25%, 06/15/14 5 ---------------------------------------------------------------------------- 169 ---------------------------------------------------------------------------- CONSUMER SERVICES -- 1.0% 25 Alderwoods Group, Inc., 7.75%, 09/15/12, # + 27 100 Corrections Corp. of America, 7.50%, 05/01/11 106 Service Corp. International, 9 6.00%, 12/15/05 9 70 7.70%, 04/15/09 75 130 6.75%, 04/01/16 133 55 Stewart Enterprises, Inc., 6.25%, 02/15/13, # 55 50 United Rentals North America, Inc., 6.50%, 02/15/12 50 ---------------------------------------------------------------------------- 455 ---------------------------------------------------------------------------- ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.7% 80 Celestica, Inc. (Canada), 7.88%, 07/01/11 84 45 Flextronics International LTD (Singapore), 6.50%, 05/15/13 47 Rayovac Corp., $ 110 8.50%, 10/01/13 $ 120 45 7.38%, 02/01/15, # 46 20 Sanmina-SCI Corp., 6.75%, 03/01/13, # 20 ---------------------------------------------------------------------------- 317 ---------------------------------------------------------------------------- ENTERTAINMENT/LEISURE -- 0.5% 25 Argosy Gaming Co., 7.00%, 01/15/14 + 28 Six Flags, Inc., 3 8.88%, 02/01/10 3 35 9.75%, 04/15/13 33 100 Vail Resorts, Inc., 6.75%, 02/15/14 102 50 Warner Music Group, 7.38%, 04/15/14, # 53 ---------------------------------------------------------------------------- 219 ---------------------------------------------------------------------------- ENVIRONMENTAL SERVICES -- 0.4% Allied Waste North America, Inc., 50 6.13%, 02/15/14 + 47 120 7.38%, 04/15/14, Ser. B + 115 ---------------------------------------------------------------------------- 162 ---------------------------------------------------------------------------- FINANCIAL SERVICES -- 5.8% American General Finance Corp., 25 3.00%, 11/15/06, Ser. H, MTN + 25 5 4.50%, 11/15/07, Ser. H, MTN + 5 120 Arch Western Finance LLC, 6.75%, 07/01/13, # + 125 1,097 Core Investment Grade Bond Trust I, 4.73%, 11/30/07 1,107 10 FleetBoston Financial Corp., 7.25%, 09/15/05 10 Goldman Sachs Group, Inc., 360 5.13%, 01/15/15 360 20 6.35%, 02/15/34 21 HSBC Capital Funding LP (Channel Islands), 130 4.61%, to 06/13; thereafter FRN, 12/31/49 # 125 30 9.55%, to 06/10; thereafter FRN, 12/31/49, # (i) 37
SEE NOTES TO FINANCIAL STATEMENTS. 47
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED FINANCIAL SERVICES -- CONTINUED $ 210 ING Capital Funding Trust III, 8.44%, to 12/10; thereafter FRN, 12/31/49 $ 248 95 Jostens IH Corp., 7.63%, 10/01/12, # 98 25 Morgan Stanley, 5.80%, 04/01/07 26 25 Nexstar Finance LLC/Nexstar Finance, Inc., 12.00%, 04/01/08 27 5 Prudential Holdings LLC, 8.70%, 12/18/23, # 6 35 SLM Corp., 5.63%, 04/10/07, Ser. A, MTN 36 224 Targeted Return Index (TRAINS), 8.21%, 08/01/15, Ser. HY-2004-1, # 241 80 UGS Corp., 10.00%, 06/01/12, # 90 65 Yell Finance BV (The Netherlands), 10.75%, 08/01/11 74 ---------------------------------------------------------------------------- 2,661 ---------------------------------------------------------------------------- FOOD/BEVERAGE PRODUCTS -- 0.4% 10 Del Monte Corp., 6.75%, 02/15/15, # 10 45 Delhaize America, Inc., 8.13%, 04/15/11 52 Dole Food Co., Inc., 25 7.25%, 06/15/10 26 25 8.88%, 03/15/11 27 55 Swift & Co., 10.13%, 10/01/09 61 ---------------------------------------------------------------------------- 176 ---------------------------------------------------------------------------- HEALTH CARE/HEALTH CARE SERVICES -- 2.5% 130 Ardent Health Services, Inc., 10.00%, 08/15/13 + 137 95 Extendicare Health Services, Inc., 6.88%, 05/01/14 97 100 Fresenius Medical Care Capital Trust IV, 7.88%, 06/15/11 111 120 Genesis HealthCare Corp., 8.00%, 10/15/13 132 200 HCA, Inc., 6.75%, 07/15/13 208 700 Mariner Health Group, Inc., 9.50%, 04/01/06, Ser. B (d) (f) * 0^^ 100 Medex, Inc., 8.88%, 05/15/13 115 45 Select Medical Corp., 7.63%, 02/01/15, # 47 Tenet Healthcare Corp., $ 60 6.50%, 06/01/12 $ 55 50 7.38%, 02/01/13 47 65 9.25%, 02/01/15, # 67 100 Triad Hospitals, Inc., 7.00%, 11/15/13 103 15 UnitedHealth Group, Inc., 3.30%, 01/30/08 15 ---------------------------------------------------------------------------- 1,134 ---------------------------------------------------------------------------- HOTELS/OTHER LODGING -- 0.7% 50 Ameristar Casinos, Inc., 10.75%, 02/15/09 + 56 30 Caesars Entertainment, Inc., 7.00%, 04/15/13 33 40 ITT Corp., 7.38%, 11/15/15 46 50 Mandalay Resort Group, 10.25%, 08/01/07, Ser. B 56 80 MGM Mirage, 6.75%, 09/01/12 85 60 Starwood Hotels & Resorts Worldwide, Inc., 7.88%, 05/01/12 69 ---------------------------------------------------------------------------- 345 ---------------------------------------------------------------------------- INSURANCE -- 0.2% 10 Arch Capital Group LTD (Bermuda), 7.35%, 05/01/34 + 11 20 Aspen Insurance Holdings LTD (Bermuda), 6.00%, 08/15/14, # + 21 15 CNA Financial Corp., 5.85%, 12/15/14 + 15 10 Liberty Mutual Group, 7.00%, 03/15/34, # 11 20 Monumental Global Funding II, 3.90%, 06/15/09, # 19 Nationwide Financial Services, Inc., 5 6.25%, 11/15/11 5 5 5.90%, 07/01/12 5 5 Odyssey Re Holdings Corp., 7.65%, 11/01/13 6 ---------------------------------------------------------------------------- 93 ---------------------------------------------------------------------------- MACHINERY & ENGINEERING EQUIPMENT -- 0.3% 125 Terex Corp., 7.38%, 01/15/14 132
SEE NOTES TO FINANCIAL STATEMENTS. 48
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED METALS/MINING -- 0.6% $ 45 Novelis, Inc. (Canada), 7.25%, 02/15/15, # $ 47 200 Peabody Energy Corp., 6.88%, 03/15/13, Ser. B 216 ---------------------------------------------------------------------------- 263 ---------------------------------------------------------------------------- MULTI-MEDIA -- 2.0% 70 CanWest Media Inc. (Canada), 8.00%, 09/15/12, # 75 115 Charter Communications Operating LLC, 8.00%, 04/30/12, # 118 10 Clear Channel Communications, Inc., 5.50%, 09/15/14 10 25 Comcast Cable Communications Holdings, Inc., 8.38%, 03/15/13 + 30 Dex Media, Inc., 5 8.00%, 11/15/13, Ser. B 5 125 0% to 11/08; thereafter 9.00%, 11/15/13, SUB 98 80 DirecTV Holdings LLC, 8.38%, 03/15/13 90 25 Houghton Mifflin Co., 9.88%, 02/01/13 26 75 Lodgenet Entertainment Corp., 9.50%, 06/15/13 83 5 News America, Inc., 6.20%, 12/15/34, # 5 80 Sinclair Broadcast Group, Inc., 8.00%, 03/15/12 85 65 Sun Media Corp. (Canada), 7.63%, 02/15/13 70 10 Time Warner Entertainment Co., LP, 8.38%, 03/15/23 13 115 Time Warner, Inc., 7.63%, 04/15/31 + 141 10 Viacom, Inc., 7.88%, 07/30/30 13 60 Videotron Ltee (Canada), 6.88%, 01/15/14, # 63 ---------------------------------------------------------------------------- 925 ---------------------------------------------------------------------------- OFFICE/BUSINESS EQUIPMENT -- 0.2% 90 Xerox Corp., 7.63%, 06/15/13 98 OIL & GAS -- 2.0% 5 Alberta Energy Co. LTD (Canada) (Yankee), 7.38%, 11/01/31 + 6 $ 15 BP Capital Markets PLC (United Kingdom), 2.75%, 12/29/06 + $ 15 5 Canadian Natural Resources LTD Canada) (Yankee), 7.20%, 01/15/32 6 115 Chesapeake Energy Corp., 6.88%, 01/15/16 124 140 Denbury Resources, Inc., 7.50%, 04/01/13 151 90 Devon Financing Corp. ULC, 7.88%, 09/30/31 115 165 Gazprom International SA (Luxembourg), 7.20%, 02/01/20, # 175 35 Hanover Compressor Co., 9.00%, 06/01/14 39 10 Kerr-McGee Corp., 6.95%, 07/01/24 11 85 Newfield Exploration Co., 6.63%, 09/01/14, # 92 20 Pioneer Natural Resources Co., 5.88%, 07/15/16 21 35 Swift Energy Co., 9.38%, 05/01/12 39 15 The Premcor Refining Group, Inc., 7.50%, 06/15/15 16 5 Transocean, Inc. (Cayman Islands), 7.50%, 04/15/31 6 85 Valero Energy Corp., 7.50%, 04/15/32 105 ---------------------------------------------------------------------------- 921 ---------------------------------------------------------------------------- PACKAGING -- 1.2% 110 Crown European Holdings SA (France), 9.50%, 03/01/11 124 20 Graphic Packaging International Corp., 9.50%, 08/15/13 23 25 Jefferson Smurfit Corp., 7.50%, 06/01/13 26 Owens-Brockway Glass Container, Inc., 50 8.75%, 11/15/12 56 125 8.25%, 05/15/13 137 65 Silgan Holdings, Inc., 6.75%, 11/15/13 67 100 Smurfit - Stone Container Enterprises, Inc., 9.75%, 02/01/11 109 ---------------------------------------------------------------------------- 542 ---------------------------------------------------------------------------- PAPER/FOREST PRODUCTS -- 0.9% 110 Bowater, Inc., 6.50%, 06/15/13 + 112
SEE NOTES TO FINANCIAL STATEMENTS. 49
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED PAPER/FOREST PRODUCTS -- CONTINUED Georgia-Pacific Corp., $ 100 8.88%, 02/01/10 $ 117 100 9.50%, 12/01/11 124 5 International Paper Co., 5.85%, 10/30/12 5 30 Millar Western Forest Products LTD (Canada), 7.75%, 11/15/13 32 10 Neenah Paper, Inc., 7.38%, 11/15/14, # 10 25 Tembec Industries, Inc. (Canada), 8.50%, 02/01/11 25 ---------------------------------------------------------------------------- 425 ---------------------------------------------------------------------------- PHARMACEUTICALS -- 0.0% ^ 10 Hospira, Inc., 4.95%, 06/15/09 11 5 Wyeth, 6.45%, 02/01/24 5 ---------------------------------------------------------------------------- 16 ---------------------------------------------------------------------------- PIPELINES -- 0.6% 100 Dynegy Holdings, Inc., 10.13%, 07/15/13, # 114 Kinder Morgan Energy Partners LP, 5 5.13%, 11/15/14 5 10 7.40%, 03/15/31 12 5 7.75%, 03/15/32 6 5 7.30%, 08/15/33 6 100 Northwest Pipeline Corp., 8.13%, 03/01/10 110 20 Williams Companies, Inc., 8.13%, 03/15/12 23 ---------------------------------------------------------------------------- 276 ---------------------------------------------------------------------------- REAL ESTATE -- 0.0% ^ 10 Westfield Capital Corp., LTD (Australia), 5.13%, 11/15/14, # 10 REAL ESTATE INVESTMENT TRUST -- 0.2% 30 Host Marriott LP, 9.25%, 10/01/07, Ser. G 33 35 Ventas Realty LP/Ventas Capital Corp., 9.00%, 05/01/12 41 ---------------------------------------------------------------------------- 74 ---------------------------------------------------------------------------- RETAILING -- 0.8% $ 130 Dillard's, Inc., 7.85%, 10/01/12 $ 143 50 Ferrellgas Escrow LLC/Ferrellgas Finance Escrow Corp., 6.75%, 05/01/14 50 J.C. Penney Co., Inc., 30 8.00%, 03/01/10 34 60 6.88%, 10/15/15, Ser. A, MTN 67 20 Safeway, Inc., 4.13%, 11/01/08 20 45 Saks, Inc., 7.50%, 12/01/10 48 ---------------------------------------------------------------------------- 362 ---------------------------------------------------------------------------- SEMI-CONDUCTORS -- 0.2% 100 Freescale Semiconductor, Inc., 7.13%, 07/15/14 109 SHIPPING/TRANSPORTATION -- 0.0% ^ Norfolk Southern Corp., 5 7.80%, 05/15/27 7 5 7.25%, 02/15/31 6 5 Union Pacific Corp., 6.65%, 01/15/11 5 ---------------------------------------------------------------------------- 18 ---------------------------------------------------------------------------- STEEL -- 0.2% 70 EURamax International, Inc., 8.50%, 08/15/11 75 TELECOMMUNICATIONS -- 5.4% 175 AT&T Corp., 9.05%, 11/15/11 + 202 AT&T Wireless Services, Inc., 10 7.88%, 03/01/11 + 12 175 8.13%, 05/01/12 + 208 10 8.75%, 03/01/31 + 14 Bellsouth Corp., 450 4.20%, 09/15/09 + 444 20 6.00%, 11/15/34 + 20 15 British Telecom PLC (United Kingdom), 8.88%, 12/15/30 + 21 110 Cincinnati Bell, Inc., 8.38%, 01/15/14 113 45 Consolidated Communications Illinois/ Texas Holdings, Inc., 9.75%, 04/01/12, # 49
SEE NOTES TO FINANCIAL STATEMENTS. 50
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED TELECOMMUNICATIONS -- CONTINUED Deutsche Telekom International Finance BV (The Netherlands), $ 30 5.25%, 07/22/13 $ 31 5 8.75%, 06/15/30 7 France Telecom (France), 15 7.75%, 03/01/11 18 10 8.50%, 03/01/31 14 40 Insight Midwest LP/Insight Capital, Inc., 9.75%, 10/01/09 42 Intelsat Bermuda LTD (Bermuda), 20 7.81%, 01/15/12, FRN, # 21 20 8.63%, 01/15/15, # 21 75 Koninklijke KPN NV (The Netherlands), 8.00%, 10/01/10 87 45 MCI Inc., 8.74%, 05/01/14 51 Nextel Communications, Inc., 85 6.88%, 10/31/13 92 100 7.38%, 08/01/15 110 30 Nortel Networks LTD (Canada), 6.13%, 02/15/06 30 95 PanAmSat Corp., 9.00%, 08/15/14 105 50 Qwest Communications International, 6.29%, 02/15/09, FRN, # 51 95 Qwest Corp., 9.13%, 03/15/12, # 110 ROGERS Wireless Communications, Inc. (Canada), 50 9.63%, 05/01/11 59 105 6.38%, 03/01/14 108 20 Rural Cellular Corp., 8.25%, 03/15/12 21 SBC Communications, Inc., 10 5.10%, 09/15/14 10 20 5.63%, 06/15/16 21 Sprint Capital Corp., 110 6.90%, 05/01/19 122 5 8.75%, 03/15/32 7 10 TCI Communications, Inc., 7.88%, 02/15/26 12 Telecom Italia Capital SA (Luxembourg), 10 4.00%, 11/15/08 10 20 4.00%, 01/15/10, # 19 180 Verizon Global Funding Corp., 7.38%, 09/01/12 207 $ 15 Verizon New England, Inc., 4.75%, 10/01/13, Ser. C $ 15 15 Verizon New York, Inc., 6.88%, 04/01/12, Ser. A 17 ---------------------------------------------------------------------------- 2,501 ---------------------------------------------------------------------------- UTILITIES -- 1.3% 10 Alabama Power Co., 2.80%, 12/01/06, Ser. Y + 10 5 Arizona Public Service Co., 4.65%, 05/15/15 + 5 20 Calpine Corp., 9.63%, 09/30/14, # 21 50 CMS Energy Corp., 7.75%, 08/01/10 + 55 Dominion Resources, Inc., 15 8.13%, 06/15/10, Ser. A 17 85 6.30%, 03/15/33 90 65 DPL, Inc., 6.88%, 09/01/11 71 5 DTE Energy Co., 6.38%, 04/15/33 5 15 FPL Group Capital, Inc., 7.63%, 09/15/06 16 5 National Rural Utilities Cooperative Finance Corp., 6.50%, 03/01/07, Ser. C, MTN 5 15 Nisource Finance Corp., 6.15%, 03/01/13 16 10 Pacificorp, 4.30%, 09/15/08 10 10 Pepco Holdings, Inc., 7.45%, 08/15/32 12 Progress Energy, Inc., 25 6.85%, 04/15/12 28 5 7.00%, 10/30/31 6 10 PSEG Power LLC, 8.63%, 04/15/31 14 110 Sierra Pacific Resources, 8.63%, 03/15/14 121 15 Southern California Edison Co., 5.00%, 01/15/16 15 30 TECO Energy, Inc., 7.20%, 05/01/11 33 40 Texas Genco LLC/Texas Genco Financing Corp., 6.88%, 12/15/14, # 43 25 The AES Corp., 7.75%, 03/01/14 + 28 ---------------------------------------------------------------------------- 621 ---------------------------------------------------------------------------- Total Corporate Notes & Bonds 16,862 (Cost $17,076) ----------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 51
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED RESIDENTIAL MORTGAGE BACKED SECURITIES -- 21.7% COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.5% $ 2,692 Credit Suisse First Boston Mortgage Securities Corp., 0.97%, 06/25/20, Ser. 1997-2X, FRN, IO, # + $ 27 1 DLJ Mortgage Acceptance Corp., 126.50%, 07/28/27, Ser. 1997-D, FRN, # 1 650 Federal National Mortgage Association, 5.00%, 07/01/34, Ser. 353, Class 2, IO 165 34 MASTR Alternative Loans Trust, 8.00%, 01/25/35, Ser. 2004-13, Class 10A1 36 ---------------------------------------------------------------------------- 229 ---------------------------------------------------------------------------- MORTGAGE BACKED PASS-THROUGH SECURITIES -- 21.2% Federal Home Loan Mortgage Corp., 20 6.00%, 05/01/17, Gold Pool E89420 21 790 6.00%, 03/15/34, Gold Pool, TBA 811 210 6.00%, 04/15/34, Gold Pool, TBA 215 100 6.00%, 01/01/35, Gold Pool A29420 103 Federal National Morgage Association, 469 6.00%, 03/01/33, Pool 686332 482 500 5.50%, 03/25/34, TBA 504 800 6.00%, 03/25/34, TBA 821 2,200 5.00%, 04/25/34, TBA 2,163 400 5.50%, 04/25/34, TBA 402 96 5.50%, 06/01/34, Pool 780921 96 400 5.50%, 11/01/34, Pool 802089 404 497 5.50%, 12/01/34, Pool 781823 501 517 6.00%, 01/01/35, Pool 787546 530 423 6.00%, 01/01/35, Pool 808932 434 295 6.00%, 01/01/35, Pool 806206 303 448 6.50%, 01/01/35, Pool 787547 468 230 7.00%, 01/01/35, Pool 787548 242 50 6.50%, 02/01/35, Pool 787555 52 15 7.00%, 02/01/35, Pool 787556 16 400 5.00%, 03/25/35, TBA 394 800 Government National Mortgage Association, 5.50%, 03/15/35, TBA 813 ---------------------------------------------------------------------------- 9,775 ---------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 10,004 (Cost $10,213) ---------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 0.9% $ 25 Bear Stearns Commercial Mortgage Securities, Inc., 4.52%, 11/11/41, Ser. 2004-PWR6, Class A4 + $ 25 150 Credit Suisse First Boston Mortgage Securities Corp., 6.38%, 12/16/35, Ser. 2001-CK1, Class A3 163 Greenwich Capital Commercial Funding Corp., 45 4.11%, 07/05/35, Ser. 2003-C1, Class A4 43 40 4.80%, 08/10/42, Ser. 2005-GG3, Class A4, FRN 40 40 4.86%, 08/10/42, Ser. 2005-GG3, Class AJ, FRN 39 60 LB-UBS Commercial Mortgage Trust, 6.65%, 11/15/27, Ser. 2001-C2, Class A2 66 20 Morgan Stanley Dean Witter Capital I, 4.92%, 03/12/35, Ser. 2003-HQ2, Class A2 20 40 Wachovia Bank Commercial Mortgage Trust, 4.85%, 10/15/41, Ser. 2005, - C16, Class A4, FRN 40 ---------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 436 (Cost $419) ---------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 1.8% 35 American Express Credit Account Master Trust, 1.69%, 01/15/09, Ser. 2003-4, Class A + 34 AmeriCredit Automobile Receivables Trust, 10 2.75%, 10/09/07, Ser. 2003-CF, Class A3 + 10 10 2.98%, 07/06/09, Ser. 2004-DF, Class A3 + 10 10 3.48%, 05/06/10, Ser. 2003-CF, Class A4 + 10 15 2.84%, 08/06/10, Ser. 2003-DM, Class A4 + 15 Capital Auto Receivables Asset Trust, 23 2.63%, 02/15/07, Ser. 2003-2, Class A3B, FRN 23 25 1.96%, 01/15/09, Ser. 2003-2, Class A4A 24
SEE NOTES TO FINANCIAL STATEMENTS. 52
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED $ 10 Capital One Auto Finance Trust, 3.18%, 09/15/10, Ser. 2003-B, Class A4 $ 10 45 Capital One Multi-Asset Execution Trust, 3.65%, 07/15/11, Ser. 2003-A4, Class A4 44 15 Citibank Credit Card Issuance Trust, 5.65%, 06/16/08, Ser. 2001-A6, Class A6 15 Countrywide Asset-Backed Certificates, 20 3.61%, 04/25/30, Ser. 2003-5, Class AF3 + 20 15 5.41%, 01/25/34, Ser. 2003-5, Class MF1 + 15 10 Daimler Chrysler Auto Trust, 2.88%, 10/08/09, Ser. 2003-A, Class A4 10 75 Ford Credit Auto Owner Trust, 3.54%, 11/15/08, Ser. 2004-A, Class A4 73 75 Household Automotive Trust, 2.22%, 11/17/09, Ser. 2003-1, Class A4 73 31 Long Beach Mortgage Loan Trust, 2.97%, 07/25/33, Ser. 2003-3, Class A, FRN 31 10 M&I Auto Loan Trust, 2.97%, 04/20/09, Ser. 2003-1, Class A4 10 20 Morgan Stanley Auto Loan Trust, 2.17%, 04/15/11, Ser. 2003-HB1, Class A2 20 40 National City Auto Receivables Trust, 2.88%, 05/15/11, Ser. 2004-A, Class A4 39 Onyx Acceptance Grantor Trust, 10 3.20%, 03/15/10, Ser. 2003-D, Class A4 10 15 2.66%, 05/17/10, Ser. 2003-C, Class A4 15 75 3.89%, 02/15/11, Ser. 2004-B, Class A4 73 10 Option One Mortgage Loan Trust, 2.97%, 08/25/33, Ser. 2003-5, Class A2, FRN 10 20 PSE&G Transition Funding LLC, 6.61%, 06/15/15, Ser. 2001-1, Class A6 22 Residential Asset Securities Corp., 5 2.90%, 07/25/32, Ser. 2002-KS4, Class AIIB, FRN 5 16 2.94%, 07/25/33, Ser. 2003-KS5, Class AIIB, FRN 16 65 SLM Student Loan Trust, 2.99%, 12/15/22, Ser.2003-11, Class A5, # 64 $ 20 Triad Auto Receivables Owner Trust, 3.20%, 12/13/10, Ser. 2003-B, Class A4 $ 20 40 USAA Auto Owner Trust, 2.04%, 02/16/10, Ser. 2003-1, Class A4 39 25 Volkswagen Auto Loan Enhanced Trust, 2.94%, 03/22/10, Ser. 2003-2, Class A4 25 15 Wachovia Asset Securitization, Inc., 3.08%, 12/25/32, Ser. 2002-HE2, Class A, FRN 16 15 WFS Financial Owner Trust, 3.15%, 05/20/11, Ser. 2003-4, Class A4 15 ---------------------------------------------------------------------------- Total Asset Backed Securities 816 (Cost $829) ---------------------------------------------------------------------------- PRIVATE PLACEMENTS -- 5.4% CO-OP APARTMENTS -- 5.4% 1,301 270 5th Ave., Secured by First Mortgage and Agreement on Co-op Apartment Building in Brooklyn, New York, 6.93%, 08/01/18, # (f) (i) 1,416 516 3512 Oxford Ave., Secured By First Mortgage and Agreement on Co-op Apartment Building in Riverdale, New York, 8.45%, 06/01/17, # (f) (i) 591 446 42 155th St., Secured by First Mortgage and Agreement on Co-op Apartment Building in New York City, New York, 7.00%, 01/01/14, # (f) (i) 478 ---------------------------------------------------------------------------- Total Private Placements 2,485 (Cost $2,263) ---------------------------------------------------------------------------- SHARES - ---------------------------------------------------------------------------------------------- WARRANTS -- 0.0% ^ FOREIGN GOVERNMENT SECURITIES -- 0.0% ^ 1 Republic of Venezuela (Oil Obligation) (Venezuela), expires 4/15/20* 18 (Cost $0 ^^) ---------------------------------------------------------------------------- Total Long-Term Investments 42,643 (Cost $41,763) ----------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 53
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ---------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS 19.7% U.S. TREASURY SECURITIES -- 0.5% United States Treasury Bills, $ 125 2.36%, 04/28/05 + @ $ 124 110 1.88%, 11/30/05 + @ 109 ---------------------------------------------------------------------------- Total U.S. Treasury Securities 233 (Cost $235) ---------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITY -- 0.4% EUR 150 French Treasury Bill (France), 0.00%, 04/14/05, DN + 198 (Cost $193) U.S. GOVERNMENT AGENCY SECURITIES -- 0.5% Federal National Mortgage Association, 115 2.95%, 12/09/05, DN + 112 90 3.00%, 12/12/05, DN + 88 30 2.97%, 12/19/05, DN + 29 ---------------------------------------------------------------------------- U.S. Government Agency Securities 229 (Cost $229) ---------------------------------------------------------------------------- COMMERCIAL PAPER -- 7.7% ASSET BACKED SECURITIES -- 7.7% 850 Aquinas Funding LLC, 2.37%, 05/09/05 + 845 $ 850 Atlantis One Funding Corp., 2.35%, 04/20/05 + $ 847 850 Fairway Finance Corp., 2.36%, 05/03/05 + 846 1,000 Grampian Funding LLC, 2.30%, 03/24/05 + 999 ---------------------------------------------------------------------------- Total Commercial Paper 3,537 (Cost $3,538) ---------------------------------------------------------------------------- SHARES - ---------------------------------------------------------------------------------------------- MONEY MARKET FUND -- 10.6% 4,911 JPMorgan Prime Money Market Fund (a) + 4,911 (Cost $4,911) ---------------------------------------------------------------------------- Total Short-Term Investments 9,108 (Cost $9,106) ---------------------------------------------------------------------------- TOTAL INVESTMENTS -- 112.1% $ 51,751 (COST $50,869) LIABILITIES IN EXCESS OF OTHER ASSETS -- (12.1)% (5,593) ---------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 46,158 ----------------------------------------------------------------------------
Percentages indicated are based on net assets. SUMMARY OF INVESTMENTS BY COUNTRY, FEBRUARY 28, 2005
COUNTRY % OF INVESTMENT SECURITIES - ---------------------------------------------------------------------------------------------- United States 76.4% Germany 2.7 Canada 2.3 Venezuela 1.8 Russia 1.8 Brazil 1.6 Peru 1.6 Colombia 1.3 Ukraine 1.3 France 1.2 Mexico 1.1 Panama 1.0 Italy 0.8 The Netherlands 0.6 El Salvador 0.6 South Africa 0.6 Turkey 0.6 United Kingdom 0.6 Malaysia 0.5 Other (below 0.5%) 1.6 - ---------------------------------------------------------------------------------------------- TOTAL 100.0% - ----------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 54 FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 2/28/05 (USD) (DEPRECIATION) (USD) - ---------------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 4 Euro-BOBL March, 2005 $ 597 $ (2) 3 Euro-Schatz March, 2005 421 (1) 14 Treasury Bonds June, 2005 1,573 (15) 12 2 Year Treasury Notes June, 2005 2,489 (6) 9 5 Year Treasury Notes June, 2005 968 (6) 1 10 Year Treasury Notes June, 2005 110 -^^ SHORT FUTURES OUTSTANDING (7) Euro-BUND March, 2005 (1,098) -^^ (8) Treasury Bonds June, 2005 (899) 9 (4) 5 Year Treasury Notes June, 2005 (430) 3 (22) 10 Year Treasury Notes June, 2005 (2,417) 15
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
NET UNREALIZED SETTLEMENT SETTLEMENT VALUE AT APPRECIATION CONTRACTS TO BUY DATE VALUE (USD) 2/28/05 (USD) (DEPRECIATION) (USD) - ----------------------------------------------------------------------------------------------------------------- 273 CAD 3/29/05 $ 218 $ 221 $ 3 270 EUR 3/29/05 349 357 8 4 EUR for 3 GBP 3/29/05 5 5 -^^ - ----------------------------------------------------------------------------------------------------------------- 572 583 11 - ----------------------------------------------------------------------------------------------------------------- NET UNREALIZED SETTLEMENT SETTLEMENT VALUE AT APPRECIATION CONTRACTS TO BUY DATE VALUE (USD) 2/28/05 (USD) (DEPRECIATION) (USD) - ----------------------------------------------------------------------------------------------------------------- 369 CAD 3/29/05 $ 297 $ 299 $ (2) 1,938 EUR 3/29/05 2,526 2,567 (41) 125 GBP 3/29/05 233 240 (7) - ----------------------------------------------------------------------------------------------------------------- 3,056 3,106 (50) - -----------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 55 JPMORGAN SHORT TERM BOND FUND PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2005 (Amounts in thousands)
SHARES ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 92.1% PREFERRED STOCK -- 1.0% FINANCIAL SERVICES -- 1.0% 7 Pinto Totta International Finance, 7.77%, to 08/07; thereafter AR, # + $ 7,095 (Cost $7,577) PRINCIPAL AMOUNT ~ - ---------------------------------------------------------------------------------------------- U.S. TREASURY SECURITY -- 0.7% $ 4,784 U.S. Treasury Bond, 1.62%, 01/15/15, 4,754 (Cost $4,718) FOREIGN GOVERNMENT SECURITIES -- 6.3% EUR 4,050 Federal Republic of Germany (Germany), 4.75%, 07/04/34, Ser. 03 5,889 EUR 3,950 Government of France (France), 5.75%, 10/25/32 6,580 4,250 Republic of Chile (Chile), 3.11%, 01/28/08, FRN + 4,280 3,757 Republic of Colombia (Colombia), 9.75%, 04/09/11 + 4,264 2,250 Republic of Ukraine (Ukraine), 7.65%, 06/11/13, Regulation S 2,475 Russian Federation (Russia), 14,250 8.75%, 07/24/05, # + 14,536 5,500 8.75%, 07/24/05, Regulation S 5,610 1,800 United Mexican States (Mexico), 3.33%, 01/13/09, FRN 1,824 ----------------------------------------------------------------------------- Total Foreign Government Securities 45,458 (Cost $44,908) ----------------------------------------------------------------------------- STATE AND MUNICIPAL OBLIGATIONS -- 0.7% ILLINOIS -- 0.3% 2,350 Illinois State, Taxable Pension, GO, 2.50%, 06/01/08 + 2,230 TEXAS -- 0.4% 3,150 Texas Public Finance Authority, Unemployment Compensation, Ser. B, Rev., 2.63%, 06/15/06 3,104 ----------------------------------------------------------------------------- Total State and Municipal Obligations 5,334 (Cost $5,494) ----------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 44.9% ADVERTISING -- 0.5% $ 3,500 R.H. Donnelley, Inc., 8.88%, 12/15/10 + $ 3,868 AGRICULTURAL PRODUCTION/SERVICES -- 0.5% 3,170 National Agricultural Cooperative Federation (South Korea), 5.75%, 06/18/14, FRN 3,293 AUTOMOTIVE -- 2.8% 8,950 DaimlerChrysler N.A. Holding Corp., 3.47%, 05/24/06, MTN, FRN + 8,997 Ford Motor Credit Co., 4,500 4.95%, 01/15/08 + 4,454 650 5.80%, 01/12/09 + 649 General Motors Acceptance Corp., 900 6.75%, 01/15/06 + 918 5,150 6.13%, 08/28/07 + 5,244 ----------------------------------------------------------------------------- 20,262 ----------------------------------------------------------------------------- BANKING -- 10.6% 1,764 Abbey National PLC (United Kingdom) (Yankee), 7.35%, to 10/06; thereafter FRN, 12/31/49 + 1,845 2,050 Bacob Bank SC (Belgium), 7.25%, to 09/07; thereafter FRN, 12/31/49, # + 2,186 2,800 BBVA Bancomer Capital Trust I (Mexico), 10.50%, 02/16/11, # + 2,972 420 BCI US Funding Trust, 8.01%, to 07/08; thereafter FRN, 12/31/49, # + 463 1,200 Chohung Bank (South Korea), 4.63%, 11/03/14, FRN, # + 1,162 Citibank Korea, Inc. (South Korea), 2,800 6.95%, 12/06/11 2,944 3,350 4.68%, 06/18/13, Ser. E, FRN, MTN 3,363 1,300 Deutsche Bank Capital Funding Trust I, 7.87%, to 06/09; thereafter FRN, 12/31/49, # + 1,460
SEE NOTES TO FINANCIAL STATEMENTS. 56
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED BANKING -- CONTINUED $ 3,500 ForeningsSparbanken AB (Sweden), 7.50%, to 11/06; thereafter FRN,12/31/49, # $ 3,687 4,050 Industrial Bank of Korea (South Korea), 4.00%, to 05/09; thereafter FRN, 05/19/14, # + 3,921 2,000 KBC Bank Fund Trust III, 9.86%, to 11/09; thereafter FRN, 11/29/49, # + 2,406 5,000 Korea First Bank (South Korea), 6.25%, to 10/08; thereafter FRN, 10/02/13, Regulation S 5,221 2,300 National Westminster Bank PLC (United Kingdom) (Yankee), 7.75%, to 10/07; thereafter FRN, 12/31/49 + 2,476 1,700 Nordea Bank Finland PLC/New York, 7.50%, to 01/07; thereafter 12/31/49, FRN, # + 1,788 Popular North America, Inc., 1,150 6.13%, 10/15/06, Ser. E, MTN + 1,185 1,950 4.25%, 04/01/08 + 1,945 7,195 Royal Bank of Scotland Group PLC (United Kingdom), 7.82%, 12/31/49, Ser. 3 + 7,403 5,150 Skandinaviska Enskilda Banken AB (Sweden), 8.13%, to 09/06; thereafter FRN, 09/06/49, # 5,451 6,750 Spintab AB (Sweden), 7.50%, to 08/06; thereafter FRN, 12/31/49, # 7,081 2,950 Svenska Handelsbanken (Sweden), 7.13%, to 03/07; thereafter FRN, 12/31/49, # 3,115 2,000 Unicredito Italiano Capital Trust II, 9.20%, to 10/10; thereafter FRN, 12/31/49, # 2,403 2,500 Washington Mutual, Inc., 7.50%, 08/15/06 2,623 Woori Bank (South Korea), 2,150 4.50%, 12/08/09, # 2,126 1,430 5.75%, to 03/09; thereafter FRN, 03/13/14, # 1,482 4,650 Zions Bancorporation, 2.70%, 05/01/06 4,587 ----------------------------------------------------------------------------- 75,295 ----------------------------------------------------------------------------- BROADCASTING/CABLE -- 0.4% $ 2,650 Echostar DBS Corp., 9.13%, 01/15/09 + $ 2,872 BUSINESS SERVICES -- 0.5% 3,500 Cendant Corp., 6.88%, 08/15/06 + 3,641 CHEMICALS -- 0.5% 3,500 Huntsman International LLC, 9.88%, 03/01/09 + 3,859 CONSUMER PRODUCTS -- 0.8% 2,300 Deluxe Corp., 3.50%, 10/01/07, Ser. B + 2,251 3,900 Diageo Finance BV (The Netherlands), 3.00%, 12/15/06 + 3,833 ----------------------------------------------------------------------------- 6,084 ----------------------------------------------------------------------------- DIVERSIFIED -- 0.4% 3,000 Tyco International Group SA (Luxembourg) (Yankee), 6.38%, 02/15/06, # 3,066 FINANCIAL SERVICES -- 10.7% 4,600 BNP U.S. Funding LLC, 7.74%, to 12/07; thereafter FRN, 12/31/49, # + 4,997 1,800 Capital One Bank, 4.25%, 12/01/08 + 1,784 Capital One Financial Corp., 6,650 8.75%, 02/01/07 + 7,202 1,300 4.74%, 05/17/07 + 1,313 6,150 Countrywide Home Loans, Inc., 2.88%, 02/15/07, Ser. L, MTN + 6,008 Counts Trusts, 3,450 3.57%, 08/15/07, Ser. 2002-10, FRN, #, + (i) 3,473 3,450 3.62%, 08/15/07, Ser. 2002-11, FRN, #, + (i) 3,476 4,000 Credit Suisse First Boston USA, Inc., 4.63%, 01/15/08 + 4,048
SEE NOTES TO FINANCIAL STATEMENTS. 57
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED FINANCIAL SERVICES -- CONTINUED $ 2,000 HSBC Capital Funding LP (Channel Islands), 9.55%, to 06/10; thereafter FRN, 12/31/49, # + $ 2,450 International Lease Finance Corp., 1,400 3.13%, 05/03/07, Ser. P, MTN + 1,372 2,100 4.35%, 09/15/08 + 2,091 1,650 Mantis Reef LTD (Australia), 4.69%, 11/14/08, # + 1,640 1,650 MBNA America Bank N.A., 4.63%, 08/03/09 + 1,655 700 Mizuho JGB Investment LLC, 9.87%, to 06/08; thereafter FRN, 12/31/49, # + 807 2,000 Mizuho Preferred Capital Co., LLC, 8.79%, to 06/08; thereafter FRN, 12/31/49, # + 2,239 5,905 Natexis AMBS Co., LLC, 8.44%, to 06/08; thereafter FRN, 12/31/49, # + 6,629 11,000 Sigma Finance, Inc., 2.36%, 09/15/06, MTN, FRN + (i) 10,994 4,400 Special Purpose Accounts Receivable Cooperative Corp., 3.06%, 11/21/07, Ser. 2004-4, FRN, # (i) 4,399 1,700 Tokai Preferred Capital Co., LLC, 9.98%, to 06/08; thereafter FRN, 12/31/49, # 1,959 3,100 Twin Reefs Pass-Through Trust, 3.59%, to 12/09; thereafter FRN, 12/31/49, # 3,110 4,150 Two-Rock Pass Through (Bermuda), 3.71%, to 02/10; thereafter FRN, 12/31/49, # 4,176 ----------------------------------------------------------------------------- 75,822 ----------------------------------------------------------------------------- FOOD/BEVERAGE PRODUCTS -- 0.3% 2,100 Kraft Foods, Inc., 5.25%, 06/01/07 + 2,152 HOTELS/OTHER LODGING -- 0.8% 2,650 Caesars Entertainment, Inc., 7.88%, 12/15/05 + 2,730 $ 2,650 Starwood Hotels & Resorts Worldwide, Inc., 7.38%, 05/01/07 $ 2,815 ----------------------------------------------------------------------------- 5,545 ----------------------------------------------------------------------------- INSURANCE -- 1.3% 5,350 ASIF Global Financing, 2.73%, 03/14/08, FRN, # + 5,350 3,650 Oil Insurance LTD (Bermuda), 2.74%, 04/07/06, FRN, # + (i) 3,650 ----------------------------------------------------------------------------- 9,000 ----------------------------------------------------------------------------- MULTI-MEDIA -- 0.9% 1,700 Clear Channel Communications, Inc., 4.63%, 01/15/08 + 1,704 850 Dex Media East LLC/Dex Media East Finance Co., 12.13%, 11/15/12 + 1,029 3,600 Time Warner, Inc., 6.15%, 05/01/07 + 3,751 ----------------------------------------------------------------------------- 6,484 ----------------------------------------------------------------------------- OIL & GAS -- 1.2% 1,800 PEMEX Project Funding Master Trust, 3.79%, 06/15/10, FRN, # + 1,863 4,000 Salomon Brothers AG for OAO Gazprom (Germany), 9.13%, 04/25/07 4,345 2,480 Texas Municipal Gas Corp., 2.60%, 07/01/07, # 2,456 ----------------------------------------------------------------------------- 8,664 ----------------------------------------------------------------------------- PACKAGING -- 0.5% 3,500 Smurfit - Stone Container Enterprises, Inc., 9.75%, 02/01/11 3,811 PAPER/FOREST PRODUCTS -- 0.3% 2,000 Georgia-Pacific Corp., 7.38%, 07/15/08 + 2,170
SEE NOTES TO FINANCIAL STATEMENTS. 58
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED PHARMACEUTICALS -- 0.1% $ 950 Hospira, Inc., 4.95%, 06/15/09 + $ 958 PIPELINES -- 0.5% Duke Capital LLC, 2,250 4.30%, 05/18/06 + 2,262 1,400 4.33%, 11/16/06 + 1,407 ----------------------------------------------------------------------------- 3,669 ----------------------------------------------------------------------------- REAL ESTATE -- 1.2% 7,960 Socgen Real Estate Co., LLC, 7.64%, to 09/07; thereafter FRN, 12/31/49, SUB, # 8,582 REAL ESTATE INVESTMENT TRUST -- 0.8% 3,500 Host Marriott LP, 9.25%, 10/01/07, Ser. G + 3,854 2,000 iStar Financial, Inc., 4.88%, 01/15/09, Ser. B + 2,006 ----------------------------------------------------------------------------- 5,860 ----------------------------------------------------------------------------- RETAILING -- 0.1% 800 The May Department Stores Co., 3.95%, 07/15/07 + 792 TELECOMMUNICATIONS -- 5.7% 3,300 Alltel Corp., 4.66%, 05/17/07 + 3,334 3,700 British Telecom PLC (United Kingdom), 7.79%, 12/15/05 + 3,819 3,165 Crown Castle International Corp., 10.75%, 08/01/11 + 3,410 3,050 France Telecom (France), 7.95%, 03/01/06 + 3,155 3,450 Motorola, Inc., 4.61%, 11/16/07 + 3,474 7,150 SBC Communications, Inc., 4.21%, 06/05/05, # + 7,171 Sprint Capital Corp., 2,000 4.78%, 08/17/06, SUB 2,021 3,230 6.00%, 01/15/07 3,338 Telecom Italia Capital SA (Luxembourg), 1,500 4.00%, 11/15/08 1,474 1,450 4.00%, 01/15/10, # 1,406 $ 8,300 Verizon Wireless Capital LLC, 5.38%, 12/15/06 $ 8,504 ----------------------------------------------------------------------------- 41,106 ----------------------------------------------------------------------------- UTILITIES -- 3.5% 4,850 Alabama Power Co., 2.80%, 12/01/06, Ser. Y + 4,759 1,600 CC Funding Trust I, 6.90%, 02/16/07 + 1,682 1,450 Dominion Resources, Inc., 3.66%, 11/15/06, Ser. A, SUB + 1,442 2,700 FPL Group Capital, Inc., 1.88%, 03/30/05 + 2,698 3,100 National Rural Utilities Cooperative Finance Corp., 6.00%, 05/15/06 + 3,182 3,800 Niagara Mohawk Power Corp., 7.75%, 05/15/06 + 3,977 525 Pacific Gas & Electric Co., 3.60 %, 03/01/09 + 510 1,500 Pacificorp, 5.65%, 11/01/06 + 1,540 3,700 Progress Energy, Inc., 6.75%, 03/01/06 + 3,805 1,450 Sempra Energy, 4.62%, 05/17/07 + 1,463 ----------------------------------------------------------------------------- 25,058 ----------------------------------------------------------------------------- Total Corporate Notes & Bonds 321,913 (Cost $325,374) ----------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 12.8% COLLATERALIZED MORTGAGE OBLIGATIONS -- 12.8% 2,499 ABN Amro Mortgage Corp, 4.00%, 01/25/33, Ser. 2002-10, Class 1A1 + 2,498 3,353 Bank of America Alternative Loan Trust, 5.50%, 09/25/33, Ser. 2003-7, Class 1A1 + 3,399 3,131 Countrywide Home Loan Mortgage Pass Through Trust, 6.50%, 01/25/32, Ser. 2001-28, Class 2A4 + 3,124
SEE NOTES TO FINANCIAL STATEMENTS. 59
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED COLLATERALIZED MORTGAGE OBLIGATIONS -- CONTINUED Federal Home Loan Mortgage Corp., $ 3,746 6.00%, 08/15/08, Ser. 1565, Class P + $ 3,842 12,029 4.50%, 05/15/11, Ser. 2780, Class IE, IO + 560 10,286 5.00%, 10/15/21, Ser. 2750, Class IQ, IO + 981 6,500 5.00%, 09/15/24, Ser. 2929, Class PB + 6,585 8,217 5.00%, 04/15/28, Ser. 2939, Class HP + 8,335 21,704 4.51%, 10/15/30, Ser. 2814, Class S, IO, FRN + 1,487 8,389 5.00%, 12/01/34, Ser. 227, Class IO, IO + 2,168 Federal National Mortgage Association, 16,887 4.45%, 10/25/31, Ser. 2004-61, Class TS, IO, FRN + 1,129 140 5.00%, 08/25/33, Ser. 2004-29, Class ZB + 140 22,741 5.00%, 01/01/34, Ser. 347, Class 2, IO + 5,536 30,055 5.00%, 07/01/34, Ser. 353, Class 2, IO 7,627 Government National Mortgage Association, 52,076 4.60%, 02/20/24, Ser. 2003-85, Class CS, FRN, IO + 3,536 14,108 5.50%, 10/20/27, Ser. 2004-44, Class PK, IO + 1,504 2,037 MASTR Adjustable Rate Mortgages Trust, 2.41%, 12/25/33, Ser. 2003-6, Class 1A1, FRN + 2,028 475 Residential Asset Securitization Trust, 6.00%, 01/25/33, Ser. 2002-A15, Class A1 + 475 9,142 Structured Adjustable Rate Mortgage Loan Trust, 5.02%, 06/25/34, Ser. 2004-6, Class 5A1, FRN 9,193 12,794 Washington Mutual, Inc., 5.50%, 07/25/34, Ser. 2004-S3, Class 2A1 12,900 Wells Fargo Mortgage Backed Securities Trust, $ 4,462 4.64%, 12/25/33, Ser. 2003-N, Class 1A4, FRN $ 4,507 10,100 3.54%, 09/25/34, Ser. 2004-S, Class A3, FRN 10,029 ----------------------------------------------------------------------------- Total Residential Mortgage Backed Securities (Cost $92,028) 91,583 ----------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 10.3% 1,250 Banc of America Commercial Mortgage, Inc., 4.18%, 11/10/41, Ser. 2004-5, Class A2 + 1,248 10,251 CalSTRS Trust, 3.99%, 11/20/12, Ser. 2002-C6, Class A2, # + 10,233 1,993 Calwest Industrial Trust, 2.86%, 06/15/15, Ser. 2003-CALA, Class A, FRN, # + 1,998 2,594 CR, 6.70%, 08/10/14, Ser. 2000-ZC2, Class A4A, # + (i) 2,757 3,700 Credit Suisse First Boston Mortgage Securities Corp., 4.30%, 07/15/36, Ser. 2004-C3, Class A3 + 3,669 3,683 First Union Commercial Mortgage Securities, Inc., 7.38%, 04/18/29, Ser. 1997-C1, Class A3 + 3,878 4,100 Greenwich Capital Commercial Funding Corp., 4.31%, 08/10/42, Ser. 2005-GG3, Class A2, FRN + 4,066 5,550 GS Mortgage Securities Corp. II, 4.60%, 08/10/38, Ser. 2004-GG2, Class A3 + 5,587 LB-UBS Commercial Mortgage Trust, 2,950 3.32%, 03/15/27, Ser. 2003-C1, Class A2 + 2,874 7,300 3.48%, 07/15/27, Ser. 2003-C5, Class A2 + 7,110 8,300 3.99%, 10/15/29, Ser. 2004-C7, Class A2 + 8,143 3,000 Mall of America Capital Co., LLC, 2.89%, 03/12/10, Ser. 2000-1, Class A, FRN, + 3,000
SEE NOTES TO FINANCIAL STATEMENTS. 60
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED COMMERCIAL MORTGAGE BACKED SECURITIES -- CONTINUED Morgan Stanley Capital I, $ 2,573 6.22%, 06/03/30, Ser. 1998-XL1, Class A1 + $ 2,574 7,400 6.48%, 11/15/30, Ser. 1998-HF2, Class A2 + 7,859 367 Mortgage Capital Funding, Inc., 6.00%, 11/18/31, Ser. 1998-MC3, Class A1 + 369 8,200 Wachovia Bank Commercial Mortgage Trust, 4.38%, 10/15/41, Ser. 2005-C16, Class A2 8,165 ----------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities (Cost $74,910) 73,530 ----------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 13.0% 3,190 American Express Credit Account Master Trust, 3.09%, 02/15/12, Ser. 2004-C, Class C, FRN, # + 3,200 AmeriCredit Automobile Receivables Trust, 9,200 2.84%, 08/06/10, Ser. 2003-DM, Class A4 + 9,047 2,800 2.67%, 03/07/11, Ser. 2004-BM, Class A4 + 2,710 550 Capital One Auto Finance Trust, 3.18%, 09/15/10, Ser. 2003-B, Class A4 + 540 3,700 Capital One Master Trust, 3.39%, 08/15/08, Ser. 2000-4, Class C, FRN, # + 3,712 4,400 Capital One Multi-Asset Execution Trust, 3.70%, 05/17/10, Ser. 2004-B5, Class B5 + 4,360 3,650 Carmax Auto Owner Trust, 3.07%, 10/15/10, Ser. 2003-2, Class A4 + 3,588 CARSS Finance LP (Cayman Islands), 484 2.87%, 01/15/11, Ser. 2004-A, Class B1, FRN, # + 484 1,129 3.54%, 01/15/11, Ser. 2004-A, Class B2, FRN, # + 1,134 Citibank Credit Card Issuance Trust, $ 5,050 3.51%, 03/20/08, Ser. 2003-C2, Class C2, FRN + $ 5,087 4,375 6.65%, 05/15/08, Ser. 2001-C3, Class C3 + 4,520 4,000 2.88%, 06/25/09, Ser. 2002-B1, Class B1, FRN + 4,016 407 Comed Transitional Funding Trust, 5.44%, 03/25/07, Ser. 1998-1, Class A5 + 408 5,400 Countrywide Asset-Backed Certificates, 3.61%, 04/25/30, Ser. 2003-5, Class AF3 + 5,381 1,120 EQCC Trust, 2.95%, 11/25/31, Ser. 2002-1, Class 2A, FRN + 1,122 Household Automotive Trust, 12,000 3.44%, 05/18/09, Ser. 2002-3, Class A4A + 11,996 1,700 3.02%, 12/17/10, Ser. 2003-2, Class A4 + 1,668 4,000 Long Beach Mortgage Loan Trust, 3.22%, 07/25/34, Ser. 2004-3, Class M1, FRN + 4,015 2,200 MBNA Credit Card Master Note Trust, 2.99%, 01/15/08, Ser. 2002-B3, Class B3, FRN + 2,202 1,428 Peco Energy Transition Trust, 5.80%, 03/01/07, Ser. 1999-A, Class A4 + 1,429 291 Providian Home Equity Loan Trust, 2.94%, 06/25/25, Ser. 1999-1, Class A, FRN + 292 4,100 SLM Student Loan Trust, 2.99%, 12/15/22, Ser. 2003-11, Class A5, # + 4,033 2,663 Wachovia Asset Securitization, Inc., 3.08%, 12/25/32, Ser. 2002-HE2, Class A, FRN 2,676 WFS Financial Owner Trust, 6,100 4.50%, 02/20/10, Ser. 2002-2, Class A4, SUB 6,150 6,400 3.25%, 05/20/11, Ser. 2003-3, Class A4 6,322
SEE NOTES TO FINANCIAL STATEMENTS. 61
PRINCIPAL AMOUNT ~ ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED $ 3,500 World Omni Auto Receivables Trust, 2.87%, 11/15/10, Ser. 2003-B, Class A4 $ 3,413 ----------------------------------------------------------------------------- Total Asset Backed Securities 93,505 (Cost $94,094) ----------------------------------------------------------------------------- PARTICIPATORY NOTE -- 0.4% DIVERSIFIED -- 0.4% 3,150 Tyco International Group SA Participation Certificate Trust, 4.44%, 06/15/07, # 3,163 (Cost $3,150) CERTIFICATES OF DEPOSIT -- 2.0% 11,450 Deutsche Bank AG/New York (Yankee), 3.02%, 05/15/07, Floating Rate + 11,444 2,900 Sovereign Bank, 4.00%, 02/01/08 2,890 ----------------------------------------------------------------------------- Total Certificates of Deposit 14,334 (Cost $14,348) ----------------------------------------------------------------------------- Total Long-Term Investments 660,669 (Cost $666,601) ----------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 9.8% U.S. TREASURY SECURITY -- 0.3% 1,985 United States Treasury Bill, 2.33%, 04/14/05, @ + 1,979 (Cost $1,979) MUNICIPAL SECURITY -- 0.7% SOUTH CAROLINA -- 0.7% $ 4,700 South Carolina Student Loan Corp., Education Loans, Ser. A-1, Rev., FRDO, 2.52%, 03/29/05 $ 4,700 (Cost $4,700) COMMERCIAL PAPER -- 0.5% CONSUMER PRODUCTS -- 0.5% 3,700 Altria Group, Inc., 3.00%, 05/02/05 + 3,681 (Cost $3,681) SHARES - ---------------------------------------------------------------------------------------------- MONEY MARKET FUND -- 8.3% 59,374 JPMorgan Prime Money Market Fund (a) + 59,374 (Cost $59,374) Total Short-Term Investments 69,734 (Cost $69,734) ----------------------------------------------------------------------------- TOTAL INVESTMENTS -- 101.9% $ 730,403 (COST $736,335) LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.9)% (13,526) ----------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 716,877 -----------------------------------------------------------------------------
Percentages indicated are based on net assets. SEE NOTES TO FINANCIAL STATEMENTS. 62 FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 2/28/05 (USD) (DEPRECIATION) (USD) - ---------------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 209 30 Day Federal Funds April, 2005 $ 84,674 $ (14) 426 2 Year Treasury Notes June, 2005 88,348 (87) 669 10 Year Treasury Notes June, 2005 73,506 (492) 361 Eurodollar December, 2005 86,617 (783) SHORT FUTURES OUTSTANDING (179) Euro-BUND March, 2005 (28,071) 65 (1) 30 Day Federal Funds March, 2005 (406) -^^ (403) 5 Year Treasury Notes June, 2005 (43,354) 258 (80) 10 Year Treasury Notes June, 2005 (8,790) 54 (552) Eurodollar December, 2006 (131,935) 772
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
NET UNREALIZED SETTLEMENT SETTLEMENT VALUE AT APPRECIATION CONTRACTS TO SELL DATE VALUE (USD) 2/28/05 (USD) (DEPRECIATION) (USD) - ----------------------------------------------------------------------------------------------------------------- 9,725 EUR 5/26/05 $ 12,870 $ 12,900 $ (30)
SWAP CONTRACTS
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - ------------------------------------------------------------------------------------------------------------------ Swap - price lock with Credit Suisse First Boston International on U.S. Treasury Note, 2.50%, 09/30/06, price less 98.90, the Fund receives positive, pays negative. 03/03/05 $ 157,800 $ (679) Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Inflation Index, 1.63%, 01/15/15, price less 99.74, the Fund receives positive, pays negative. 03/31/05 4,700 (25) Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Note, 4.00%, 02/15/15, price less 97.56, the Fund receives negative, pays positive. 03/31/05 5,300 30 Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Inflation Index, 3.38%, 01/15/07, price less 104.82, the Fund receives negative, pays positive. 03/31/05 18,100 2 Swap - price lock with Lehman Brothers Special Financing U.S. Treasury Note, 3.13%, 01/31/07, price less 99.21, the Fund receives positive, pays negative. 03/31/05 22,800 (21) Swap - price lock with Credit Suisse First Boston International on U.S. Treasury Note, 3.13%, 01/31/07, price less 99.08, the Fund receives positive, pays negative. 03/31/05 37,400 -
SEE NOTES TO FINANCIAL STATEMENTS. 63 JPMORGAN SHORT TERM BOND FUND
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - ------------------------------------------------------------------------------------------------------------------ Swap - price lock with Credit Suisse First Boston International on U.S. Treasury Note 2.63%, 03/15/09, price less 95.21, the Fund receives negative, pays positive. 03/31/05 $ 38,600 $ - Swap - price lock with Citibank, N.A., on 30 Year FNMA, 4.50%, TBA, price less 97.62, the Fund receives negative, pays positive. 04/13/05 38,000 540 Swap - price lock with Citibank, N.A., on 30 Year FNMA, 5.50%, TBA, price less 101.63, the Fund receives positive, pays negative. 04/13/05 60,000 (488) Swap - price lock with Morgan Stanley Capital Services on 30 Year FNMA, 6.00%, 04/15/05, price less 102.89, the Fund receives positive, pays negative. 04/11/05 150,000 (732) Swap - price lock with Morgan Stanley Capital Services on 30 Year FNMA, 5.50%, 04/15/05, price less 101.27, the Fund receives negative, pays positive. 04/11/05 75,000 492 Swap - price lock with Morgan Stanley Capital Services on 30 Year FNMA, 6.50%, 04/15/05, price less 104.38, the Fund receives negative, pays positive. 04/11/05 75,000 293 Swap - spread lock with Citibank N.A., on 3 Year Swap Spread, price less 43.05, the Fund receives positive, pays negative. 05/02/05 109,000 58 Credit Default Contract with Deutsche Bank AG, New York. Fund receives quarterly payment of 1.5 (6 per annum) BPS times notional amount of General Electric Capital Corp., 6.00%, 06/15/12. Upon a defined credit event, Fund pays notional amount and takes receipt of a defined deliverable obligation. 06/20/05 7,000 2 Credit Default Contract with Deutsche Bank AG, New York. Fund receives quarterly payment of 3.5 (14 per annum) BPS times notional amount of Wachovia Corp., 3.63%, 02/17/09. Upon a defined credit event, Fund pays notional amount and takes receipt of a defined deliverable obligation. 12/20/05 10,000 12 Credit Default Contract with Deutsche Bank AG, New York. Fund receives quarterly payment of 4.75 (19 per annum) BPS times notional amount of Prudential, 6.38%, 06/23/06. Upon a defined credit event, Fund pays notional amount and takes receipt of a defined deliverable obligation. 09/20/06 7,600 11 Credit Default Contract with Deutsche Bank AG, New York. Fund receives quarterly payment of 4 (16 per annum) BPS times notional amount of Coca-Cola Co., 5.75%, 03/15/11. Upon a defined credit event, Fund pays notional amount and takes receipt of a defined deliverable obligation. 12/31/06 5,300 5 Credit Default Contract with Deutsche Bank AG, New York. Fund receives quarterly payment of 12 (48 per annum) BPS times notional amount of Sun Trust Banks, Inc., 2.48%, 03/15/28. Upon a defined credit event, Fund pays notional amount and takes receipt of a defined deliverable obligation. 06/30/07 7,600 12 Credit Default Contract with Citibank, N.A. Fund receives quarterly payment of 3.5 (14 per annum) BPS times notional amount of General Electric Capital Corp., 3.50%, 05/01/08. Upon a defined credit event, Fund pays notional amount and takes receipt of a defined deliverable obligation. 12/20/07 15,000 20 Credit Default Contract with Deutsche Bank AG, New York. Fund receives quarterly payment of 5 (20 per annum) BPS times notional amount of Berkshire Hathaway, 9.75%, 01/15/18. Upon a defined credit event, Fund pays notional amount and takes receipt of a defined deliverable obligation. 03/20/10 12,100 2
SEE NOTES TO FINANCIAL STATEMENTS. 64 JPMORGAN SHORT TERM BOND FUND II PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2005 (Amounts in thousands)
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 99.3% U.S. TREASURY SECURITIES -- 0.7% $ 6,977 U.S. Treasury Bond, 1.62%, 01/15/15, $ 6,933 (Cost $6,880) U.S. GOVERNMENT AGENCY SECURITIES -- 12.8% 16,360 Federal Farm Credit Bank, 2.63%, 09/17/07 + 15,879 FEDERAL HOME LOAN MORTGAGE CORP., 76,800 2.88%, 12/15/06 + 75,725 27,750 4.88%, 03/15/07 + 28,353 8,950 3.63%, 09/15/08 + 8,821 ----------------------------------------------------------------------------- Total U.S. Government Agency Securities 128,778 (Cost $130,784) ----------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 1.1% 7,550 Republic of Chile (Chile), 3.11%, 01/28/08, FRN + 7,602 3,300 United Mexican States (Mexico), 3.33%, 01/13/09, FRN 3,345 ----------------------------------------------------------------------------- Total Foreign Government Securities 10,947 (Cost $10,843) ----------------------------------------------------------------------------- STATE AND MUNICIPAL OBLIGATIONS -- 0.5% TEXAS -- 0.5% 5,150 Texas Public Finance Authority, Unemployment Compensation, Ser. B, Rev., 2.63%, 06/15/06 5,074 (Cost $5,143) CORPORATE NOTES & BONDS -- 41.8% AGRICULTURAL PRODUCTION/SERVICES -- 0.5% 4,670 National Agricultural Cooperative Federation (South Korea), 5.75%, 06/18/14, FRN 4,851 AUTOMOTIVE -- 3.2% 14,000 DaimlerChrysler N.A. Holding Corp., 3.47%, 05/24/06, MTN, FRN + 14,071 Ford Motor Credit Co., 6,400 4.95%, 01/15/08 + 6,335 1,100 5.80%, 01/12/09 + 1,099 General Motors Acceptance Corp., $ 1,500 6.75%, 01/15/06 + $ 1,531 9,250 6.13%, 08/28/07 + 9,420 ----------------------------------------------------------------------------- 32,456 ----------------------------------------------------------------------------- BANKING -- 8.6% 2,900 Abbey National PLC (United Kingdom) (Yankee), 7.35%, to 10/06; thereafter FRN, 12/31/49, + 3,032 3,450 Bacob Bank SC (Belgium), 7.25%, to 09/07; thereafter FRN, 12/31/49, # + 3,679 600 BCI US Funding Trust, 8.01%, to 07/08; thereafter FRN, 12/31/49, # + 662 2,100 Capital One Bank, 6.88%, 02/01/06 + 2,160 1,900 Deutsche Bank Capital Funding Trust I, 7.87%, to 06/09; thereafter FRN, 12/31/49, # + 2,134 6,200 ForeningsSparbanken AB (Sweden), 7.50%, to 11/06; thereafter FRN, 12/31/49, # 6,532 5,750 Industrial Bank of Korea (South Korea), 4.00%, to 05/09; thereafter FRN, 05/19/14, # + 5,567 3,600 National Westminster Bank PLC (United Kingdom) (Yankee), 7.75%, to 10/07; thereafter FRN, 12/31/49, + 3,876 2,750 Nordea Bank Finland PLC/New York, 7.50%, to 01/07; thereafter FRN, 12/31/49, # + 2,893 Popular North America, Inc., 1,650 6.13%, 10/15/06, Ser. E, MTN + 1,700 3,250 4.25%, 04/01/08 + 3,241 12,440 Royal Bank of Scotland Group PLC (United Kingdom), 7.82%, 12/31/49, Ser. 3 + 12,799 9,050 Skandinaviska Enskilda Banken AB (Sweden), 8.13%, to 09/06; thereafter FRN, 09/06/49, # + 9,579 7,500 Spintab AB (Sweden), 7.50%, to 08/06; thereafter FRN, 12/31/49, # 7,868
SEE NOTES TO FINANCIAL STATEMENTS. 65
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED BANKING -- CONTINUED $ 4,950 Svenska Handelsbanken (Sweden), 7.13%, to 03/07; thereafter FRN, 12/31/49, # $ 5,228 4,350 Washington Mutual, Inc., 7.50%, 08/15/06 4,564 3,250 Woori Bank (South Korea), 4.50%, 12/08/09, # 3,214 8,000 Zions Bancorporation, 2.70%, 05/01/06 7,891 ----------------------------------------------------------------------------- 86,619 ----------------------------------------------------------------------------- BROADCASTING/CABLE -- 0.7% 7,195 Comcast Cable Communications, Inc., 6.38%, 01/30/06 + 7,361 BUSINESS SERVICES -- 0.5% 5,050 Cendant Corp., 6.88%, 08/15/06 + 5,254 CONSUMER PRODUCTS -- 1.1% 3,650 Deluxe Corp., 3.50%, 10/01/07, Ser. B + 3,572 7,225 Diageo Finance BV (The Netherlands), 3.00%, 12/15/06 + 7,102 ----------------------------------------------------------------------------- 10,674 ----------------------------------------------------------------------------- FINANCIAL SERVICES -- 9.3% 7,900 BNP U.S. Funding LLC, 7.74%, to 12/07; thereafter FRN, 12/31/49, # + 8,582 7,700 Capital One Bank, 4.25%, 12/01/08 + 7,632 1,850 Capital One Financial Corp., 4.74%, 05/17/07 + 1,869 Countrywide Home Loans, Inc., 750 5.50%, 08/01/06, Ser. J, MTN + 767 10,750 2.88%, 02/15/07, Ser. L, MTN + 10,502 Counts Trusts, 6,050 3.57%, 08/15/07, Ser. 2002-10, FRN, # + (i) 6,091 6,050 3.62%, 08/15/07, Ser. 2002-11, FRN, # + (i) 6,096 3,600 Credit Suisse First Boston USA, Inc., 4.63%, 01/15/08 + 3,643 $ 3,400 International Lease Finance Corp., 4.35%, 09/15/08 + $ 3,385 2,700 Mantis Reef LTD (Australia), 4.69%, 11/14/08, # + 2,684 2,700 MBNA America Bank N.A., 4.63%, 08/03/09 + 2,708 5,400 Mizuho JGB Investment LLC, 9.87%, to 06/08; thereafter FRN, 12/31/49, # + 6,228 10,100 Natexis AMBS Co., LLC, 8.44%, to 06/08; thereafter FRN, 12/31/49, # + 11,337 1,350 Pricoa Global Funding I, 3.90%, 12/15/08, # + 1,330 2,000 PrIncipal Life Global Funding I, 5.13%, 06/28/07, # + 2,037 7,100 Special Purpose Accounts Receivable Cooperative Corp., 3.06%, 11/21/07, Ser. 2004-4, FRN, # (i) 7,099 4,600 Twin Reefs Pass-Through Trust, 3.59%, to 12/09; thereafter FRN, 12/31/49, # 4,614 6,000 Two-Rock Pass Through (Bermuda), 3.71%, to 02/10; thereafter FRN, 12/31/49, # 6,038 ----------------------------------------------------------------------------- 92,642 ----------------------------------------------------------------------------- FOOD/BEVERAGE PRODUCTS -- 0.3% 3,400 Kraft Foods, Inc., 5.25%, 06/01/07 + 3,483 INSURANCE -- 2.6% ASIF Global Financing, 9,100 2.73%, 03/14/06, FRN, # + 9,100 5,300 2.50%, 01/30/07, # + 5,161 5,900 Metropolitan Life Global Funding I, 4.75%, 06/20/07, # + 5,984 6,150 Oil Insurance LTD (Bermuda), 2.74%, 04/07/06, FRN, # + (i) 6,150 ----------------------------------------------------------------------------- 26,395 ----------------------------------------------------------------------------- MULTI-MEDIA -- 1.3% 2,750 Clear Channel Communications, Inc., 4.63%, 01/15/08 + 2,757
SEE NOTES TO FINANCIAL STATEMENTS. 66
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED MULTI-MEDIA -- CONTINUED $ 4,048 TCI Communications, Inc., 6.88%, 02/15/06 $ 4,165 6,000 Time Warner, Inc., 6.15%, 05/01/07 + 6,252 ----------------------------------------------------------------------------- 13,174 ----------------------------------------------------------------------------- OIL & GAS -- 0.7% 3,300 PEMEX Project Funding Master Trust, 3.79%, 06/15/10, FRN, # + 3,416 4,155 Texas Municipal Gas Corp., 2.60%, 07/01/07, # 4,114 ----------------------------------------------------------------------------- 7,530 ----------------------------------------------------------------------------- PHARMACEUTICALS -- 0.2% 1,550 Hospira, Inc., 4.95%, 06/15/09 + 1,564 PIPELINES -- 0.6% Duke Capital LLC, 3,650 4.30%, 05/18/06 + 3,670 2,400 4.33%, 11/16/06 + 2,412 ----------------------------------------------------------------------------- 6,082 ----------------------------------------------------------------------------- REAL ESTATE -- 1.5% 14,100 Socgen Real Estate Co., LLC, 7.64%, to 09/07; thereafter FRN, 12/31/49, # + 15,201 REAL ESTATE INVESTMENT TRUST -- 0.3% 2,900 iStar Financial, Inc., 4.88%, 01/15/09, Ser. B + 2,908 RETAILING -- 0.1% 1,350 The May Department Stores Co., 3.95%, 07/15/07 + 1,337 TELECOMMUNICATIONS -- 4.9% 4,750 Alltel Corp., 4.66%, 05/17/07 + 4,799 7,950 BellSouth Corp., 5.00%, 10/15/06 + 8,087 5,150 France Telecom (France), 7.95%, 03/01/06 + 5,327 5,850 Motorola, Inc., 4.61%, 11/16/07 + 5,890 1,550 SBC Communications, Inc., 4.21%, 06/05/05, # + 1,555 Sprint Capital Corp., $ 4,000 4.78%, 08/17/06, SUB $ 4,042 5,500 6.00%, 01/15/07 5,684 Telecom Italia Capital SA (Luxembourg), 2,500 4.00%, 11/15/08 2,457 2,300 4.00%, 01/15/10, # 2,230 8,945 Verizon Wireless Capital LLC, 5.38%, 12/15/06 9,165 ----------------------------------------------------------------------------- 49,236 ----------------------------------------------------------------------------- TRANSPORTATION -- 0.7% 7,450 CSX Corp., 2.75%, 02/15/06 + 7,364 UTILITIES -- 4.7% 8,600 Alabama Power Co., 2.80%, 12/01/06, Ser. Y + 8,440 2,300 CC Funding Trust I, 6.90%, 02/16/07 + 2,418 2,250 Dominion Resources, Inc., 3.66%, 11/15/06, Ser. A, SUB + 2,238 5,300 National Rural Utilities Cooperative Finance Corp., 6.00%, 05/15/06 + 5,440 4,800 Niagara Mohawk Power Corp., 7.75%, 05/15/06 + 5,024 900 Pacific Gas & Electric Co., 3.60%, 03/01/09 + 874 2,600 Pacificorp, 5.65%, 11/01/06 + 2,670 4,700 Pepco Holdings, Inc., 5.50%, 08/15/07 + 4,835 6,000 Progress Energy, Inc., 6.75%, 03/01/06 + 6,169 2,100 Sempra Energy, 4.62%, 05/17/07 + 2,118 6,950 Virginia Electric & Power Co., 5.38%, 02/01/07, Ser. A 7,123 ----------------------------------------------------------------------------- 47,349 ----------------------------------------------------------------------------- Total Corporate Notes & Bonds 421,480 (Cost $426,537) ----------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 13.5% COLLATERALIZED MORTGAGE OBLIGATIONS -- 13.5% 3,901 ABN Amro Mortgage Corp, 4.00%, 01/25/33, Ser. 2002-10, Class 1A1 + 3,899
SEE NOTES TO FINANCIAL STATEMENTS. 67
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED COLLATERALIZED MORTGAGE OBLIGATIONS -- CONTINUED $ 5,489 Bank of America Alternative Loan Trust, 5.50%, 09/25/33, Ser. 2003-7, Class 1A1 + $ 5,565 5,323 Countrywide Home Loan Mortgage Pass Through Trust, 6.50%, 01/25/32, Ser. 2001-28, Class 2A4 + 5,311 Federal Home Loan Mortgage Corp., 9,300 5.00%, 08/15/18, Ser. 2929, Class PA + 9,427 6,581 5.00%, 10/15/23, Ser. 2781, Class PI, IO + 615 10,200 5.00%, 04/15/28, Ser. 2939, Class HP + 10,347 54,182 4.56%, 12/15/30, Ser. 2850, Class SM, IO, FRN + 3,488 34,763 4.46%, 02/15/34, Ser. 2813, Class SB, IO, FRN + 2,939 11,744 5.00%, 12/01/34, Ser. 227, Class IO, IO + 3,035 Federal National Mortgage Association, 13,519 4.45%, 10/25/31, Ser. 2004-61, Class TS, IO, FRN + 904 32,348 5.00%, 01/01/34, Ser. 347, Class 2, IO + 7,875 46,120 5.00%, 07/01/34, Ser. 353, Class 2, IO + 11,703 Government National Mortgage Association, 2,989 5.50%, 04/20/25, Ser. 2004-46, Class IH, IO + 211 4,555 5.50%, 01/20/27, Ser. 2004-39, Class IM, IO + 391 7,143 5.50%, 10/20/27, Ser. 2004-44, Class PK, IO + 762 23 3.09%, 04/16/32, Ser. 2002-24, Class FA, FRN + 23 3,422 MASTR Adjustable Rate Mortgages Trust, 2.41%, 12/25/33, Ser. 2003-6, Class 1A1, FRN + 3,406 $ 791 Residential Asset Securitization Trust, 6.00%, 01/25/33, Ser. 2002-A15, Class A1 + $ 789 15,156 Structured Adjustable Rate Mortgage Loan Trust, 5.02%, 06/25/34, Ser. 2004-6, Class 5A1, FRN 15,241 19,044 Washington Mutual, Inc., 5.50%, 07/25/34, Ser. 2004-S3, Class 2A1 19,200 Wells Fargo Mortgage Backed Securities Trust, 7,666 4.64%, 12/25/33, Ser. 2003-N, Class 1A4, FRN 7,743 6,942 3.54%, 09/25/34, Ser. 2004-S, Class A5, FRN 6,707 16,988 3.54%, 09/25/34, Ser. 2004-S, Class A3, FRN 16,869 ----------------------------------------------------------------------------- 136,450 ----------------------------------------------------------------------------- MORTGAGE BACKED PASS-THROUGH SECURITIES -- 0.0% ^ Government National Mortgage Association, 34 8.50%, 08/15/30, Pool 531310 + 37 7 8.50%, 09/15/30, Pool 526096 + 8 ----------------------------------------------------------------------------- 45 ----------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 136,495 (Cost $136,191) ----------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 10.9% 1,950 Banc of America Commercial Mortgage, Inc., 4.18%, 11/10/41, Ser. 2004-5, Class A2 + 1,948 18,736 CalSTRS Trust, 3.99%, 11/20/12, Ser. 2002-C6, Class A2, # + 18,703 3,374 Calwest Industrial Trust, 2.86%, 06/15/15, Ser. 2003-CALA, Class A, FRN, # + 3,381 3,990 CR, 6.70%, 08/10/14, Ser. 2000-ZC2, Class A4A, # + (i) 4,242
SEE NOTES TO FINANCIAL STATEMENTS. 68
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED COMMERCIAL MORTGAGE BACKED SECURITIES -- CONTINUED $ 6,200 Credit Suisse First Boston Mortgage Securities Corp., 4.30%, 07/15/36, Ser. 2004-C3, Class A3 + $ 6,149 6,308 First Union Commercial Mortgage Securities, Inc., 7.38%, 04/18/29, Ser. 1997-C1, Class A3 + 6,643 5,900 Greenwich Capital Commercial Funding Corp., 4.31%, 08/10/42, Ser. 2005-GG3, Class A2, FRN + 5,851 9,300 GS Mortgage Securities Corp. II, 4.60%, 08/10/38, Ser. 2004-GG2, Class A3 + 9,363 LB-UBS Commercial Mortgage Trust, 5,100 3.32%, 03/15/27, Ser. 2003-C1, Class A2 + 4,969 9,300 3.48%, 07/15/27, Ser. 2003-C5, Class A2 + 9,058 5,700 3.25%, 03/15/29, Ser. 2004-C2, Class A2 + 5,477 8,700 3.99%, 10/15/29, Ser. 2004-C7, Class A2 + 8,535 12,600 Morgan Stanley Capital I, 6.48%, 11/15/30, Ser. 1998-HF2, Class A2 + 13,381 11,800 Wachovia Bank Commercial Mortgage Trust, 4.38%, 10/15/41, Ser. 2005-C16, Class A2 11,748 ----------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 109,448 (Cost $111,970) ----------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 15.3% 5,268 American Express Credit Account Master Trust, 3.09%, 02/15/12, Ser. 2004-C, Class C, FRN, # + 5,284 AmeriCredit Automobile Receivables Trust, 12,450 2.84%, 08/06/10, Ser. 2003-DM, Class A4 + 12,244 3,650 2.67%, 03/07/11, Ser. 2004-BM, Class A4 + 3,533 $ 3,000 Capital Auto Receivables Asset Trust, 1.96%, 01/15/09, Ser. 2003-2, Class A4A + $ 2,907 1,800 Capital One Auto Finance Trust, 3.18%, 09/15/10, Ser. 2003-B, Class A4 + 1,768 6,500 Capital One Master Trust, 3.39%, 08/15/08, Ser. 2000-4, Class C, FRN, # + 6,521 3,600 Capital One Multi-Asset Execution Trust, 3.70%, 05/17/10, Ser. 2004-B5, Class B5 + 3,567 6,200 Carmax Auto Owner Trust, 3.07%, 10/15/10, Ser. 2003-2, Class A4 + 6,095 2,661 CARSS Finance LP (Cayman Islands), 2.87%, 01/15/11, Ser. 2004-A, Class B1, FRN, # + 2,663 Citibank Credit Card Issuance Trust, 8,500 3.51%, 03/20/08, Ser. 2003-C2, Class C2, FRN + 8,562 7,250 6.65%, 05/15/08, Ser. 2001-C3, Class C3 + 7,490 7,000 2.88%, 06/25/09, Ser. 2002-B1, Class B1, FRN + 7,029 10,300 Countrywide Asset-Backed Certificates, 3.61%, 04/25/30, Ser. 2003-5, Class AF3 + 10,264 5,250 Daimler Chrysler Auto Trust, 2.88%, 10/08/09, Ser. 2003-A, Class A4 + 5,187 11,700 Gracechurch Card Funding PLC (United Kingdom), 2.70%, 08/15/08, Ser. 5, Class A2 + 11,523 7,300 Onyx Acceptance Grantor Trust, 3.20%, 03/15/10, Ser. 2003-D, Class A4 + 7,222 4,000 Residential Asset Securities Corp., 3.37%, 12/25/28, Ser. 2003-KS7, Class AI3 + 3,982 6,900 SLM Student Loan Trust, 2.99%, 12/15/22, Ser. 2003-11, Class A5, # + 6,787
SEE NOTES TO FINANCIAL STATEMENTS. 69
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ---------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED $ 7,900 Triad Auto Receivables Owner Trust, 3.20%, 12/13/10, Ser. 2003-B, Class A4 $ 7,760 Volkswagen Auto Loan Enhanced Trust, 7,300 1.93%, 01/20/10, Ser. 2003-1, Class A4 7,082 4,300 2.94%, 03/22/10, Ser. 2003-2, Class A4 4,217 15,600 WFS Financial Owner Trust, 3.25%, 05/20/11, Ser. 2003-3, Class A4 15,408 7,200 World Omni Auto Receivables Trust, 2.87%, 11/15/10, Ser. 2003-B, Class A4 7,022 ----------------------------------------------------------------------------- Total Asset Backed Securities 154,117 (Cost $156,139) ----------------------------------------------------------------------------- PARTICIPATORY NOTE -- 0.5% DIVERSIFIED -- 0.5% 5,350 Tyco International Group SA Participation Certificate Trust, 4.44%, 06/15/07, # 5,371 (Cost $5,350) CERTIFICATES OF DEPOSIT -- 2.2% 17,650 Deutsche Bank AG/New York (Yankee), 3.02%, 05/15/07, Floating Rate + 17,641 4,200 Sovereign Bank, 4.00%, 02/01/08 4,185 ----------------------------------------------------------------------------- Total Certificates of Deposit 21,826 (Cost $21,847) ----------------------------------------------------------------------------- Total Long-Term Investments 1,000,469 (Cost $1,011,684) ----------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.5% U.S. TREASURY SECURITY -- 0.2% $ 2,200 U.S. Treasury Bill, 2.34%, 04/14/05, @ + $ 2,194 (Cost $2,194) COMMERCIAL PAPER -- 0.5% CONSUMER PRODUCTS -- 0.5% 5,200 Altria Group, Inc., 3.00%, 05/02/05 + 5,173 (Cost $5,173) SHARES - ---------------------------------------------------------------------------------------------- MONEY MARKET FUND -- 0.8% 8,009 JPMorgan Prime Money Market Fund @ + 8,009 (Cost $8,009) ----------------------------------------------------------------------------- Total Short-Term Investments 15,376 (Cost $15,376) ----------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.8% $ 1,015,845 (COST $1,027,060) LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.8)% (7,777) ----------------------------------------------------------------------------- NET ASSETS -- 100.0% $ 1,008,068 -----------------------------------------------------------------------------
Percentages indicated are based on net assets. SEE NOTES TO FINANCIAL STATEMENTS. 70 FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 2/28/05 (USD) (DEPRECIATION) (USD) - ---------------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 322 30 day Federal Funds April, 2005 $ 130,454 $ (23) 320 2 Year Treasury Notes June, 2005 66,635 (17) 957 10 Year Treasury Notes June, 2005 105,150 (703) 617 Eurodollar December, 2005 148,041 (1,356) SHORT FUTURES OUTSTANDING (427) 5 Year Treasury Notes June, 2005 (45,936) 272 (88) 10 Year Treasury Notes June, 2005 (9,669) 59 (919) Eurodollar December, 2006 (219,652) 1,298
SWAP CONTRACTS
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - ------------------------------------------------------------------------------------------------------------------ Swap - price lock with Citibank N.A., on U.S. Treasury Note, 2.50%, 10/31/06, price less 98.80, the Fund pays negative, receives positive. 03/18/05 $ 212,800 $ (921) Swap - price lock with Citibank N.A., on U.S. Treasury Note, 3.13%, 10/15/08, price less 98.44, the Fund pays positive, receives negative. 03/22/05 85,750 954 Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Note, 1.63%, 01/15/15, price less 99.74, the Fund pays negative, receives positive. 03/31/05 6,700 (35) Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Note, 4.00%, 02/15/15, price less 97.56, the Fund pays positive, receives negative. 03/31/05 7,600 42 Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Note, 3.38%, 01/15/07, price less 104.82, the Fund pays positive, receives negative. 03/31/05 25,900 3 Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Note, 3.13%, 01/31/07, price less 99.21, the Fund pays negative, receives positive. 03/31/05 32,700 (30) Swap - price lock with Citibank N.A., on 30 Year FNMA, 4.50%, TBA, price less 97.62, the Fund pays positive, receives negative. 04/13/05 32,000 455 Swap - price lock with Citibank N.A., on 30 Year FNMA, 5.50%, TBA, price less 101.62, the Fund pays negative, receives positive. 04/13/05 50,000 (406)
SEE NOTES TO FINANCIAL STATEMENTS. 71
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - ------------------------------------------------------------------------------------------------------------------ Swap - price lock with Morgan Stanley Capital Services on 30 year FNMA, 5.5%, 04/15/05, price less 101.27, the Fund pays positive, receives negative. 04/11/05 $ 60,000 $ 394 Swap - price lock with Morgan Stanley Capital Services on 30 year FNMA, 6.5%, 04/15/05, price less 104.37, the Fund pays positive, receives negative. 04/11/05 60,000 234 Swap - price lock with Morgan Stanley Capital Services on 30 year FNMA, 6.0%, 04/15/05, price less 102.89, the Fund pays negative, receives positive. 04/11/05 120,000 (586) Credit default contract with Deutsche Bank AG, New York. Fund receives quarterly payment of 17 (68 per annum) BPS times notional amount of General Electric Capital Corp., 6.00%, 06/15/12. Upon a defined credit event, Fund pays notional amount and takes receipt of a defined deliverable obligation. 06/20/05 10,000 3 Credit default contract with Deutsche Bank AG, New York. Fund receives quarterly payment of 12 (48 per annum) BPS times notional amount of Sun Trust Banks, Inc., 2.48%, 03/15/28. Upon a defined credit event, Fund pays notional amount and takes receipt of a defined deliverable obligation. 06/30/07 12,400 19 Credit default contract with Citibank, N.A., Fund receives quarterly payment of 3.5 (14 per annum) BPS times notional amount of General Electric Capital Corp., 3.50%, 05/01/08. Upon a defined credit event, Fund pays notional amount and takes receipt of a defined deliverable obligation. 12/20/07 23,000 31 Credit default contract with Deutsche Bank AG, New York. Fund receives quarterly payment of 5 (20 per annum) BPS times notional amount of Berkshire Hathaway, 9.75%, 01/15/18. Upon a defined credit event, Fund pays notional amount and takes receipt of a defined deliverable obligation. 03/20/10 17,500 3
SEE NOTES TO FINANCIAL STATEMENTS. 72 Abbreviations * --Non - income producing security. # --All or a portion of this security is a 144A or private placement security and can only be sold to qualified institutional buyers. ~ --Denominated in United States Dollars unless otherwise noted. ^^ --Amount rounds to less than one thousand. ^ --Amount rounds to less than 0.1%. + --All or a portion of this security is segregated for futures contracts, TBA, when issued, delayed delivery securities or swaps. @ --Security is fully or partially segregated with brokers as initial margin for futures contracts. (a) --Affiliated. Money market fund registered under the Investment Company Act of 1940, as amended and advised by JPMorgan Investment Management, Inc. AR --Adjustable rate. The dividend rate shown is the rate in effect at February 28, 2005. (d) --Defaulted Security. (f) --Fair Valued Investment. The following are approximately the market value and percentage of the investments that are fair valued (amounts in thousands):
FUND MARKET VALUE PERCENTAGE ---- ------------ ---------- JPMorgan Bond Fund $ 20,205 1.90% JPMorgan Global Strategic Income Fund $ 2,488 4.81%
(i) --Security is considered illiquid and may be difficult to sell. ADR --American Depositary Receipt. BPS --Basis Points. CAD --Canadian Dollar. COP --Colombian Peso DN --Discount Note. The rate shown is the effective yield at the date of purchase. EUR --Euro. FHLMC --Federal Home Loan Mortgage Corp. FNMA --Federal National Mortgage Association. FRDO --Floating Rate Demand Obligation. The maturity date shown is the next interest reset date. The interest rate shown is the rate in effect at February 28, 2005. FRN --Floating Rate Note. The rate shown is the rate in effect as of February 28, 2005. GBP --Great Britain Pound. GO --General Obligation Bond. IO --Interest Only. LIBOR --London Interbank Offered Rate. MTN --Medium Term Note. MXN --Mexican Peso Regulation S --Securities registered under the Securities Act of 1933. Rev. --Revenue Bond. Ser. --Series. SUB --Step-up Bond. The rate shown is the rate in effect as of February 28, 2005. TBA --To Be Announced. USD --United States Dollar. UYU --Uruguay Peso SEE NOTES TO FINANCIAL STATEMENTS. 73 JPMORGAN FUNDS STATEMENT OF ASSETS AND LIABILITIES AS OF FEBRUARY 28, 2005 (Amounts in thousands, except per share amounts)
ENHANCED EMERGING BOND INCOME MARKETS DEBT FUND FUND FUND ASSETS Investments in non-affiliates, at value $ 1,033,082 $ 204,447 $ 30,391 Investments in affiliates at value 31,127 3,814 -- - --------------------------------------------------------------------------------------------------------------- Total Investment securities, at value 1,064,209 208,261 30,391 - --------------------------------------------------------------------------------------------------------------- Cash 1,240 1,326 1,288 Foreign currency, at value -- -- 53 Receivables: Investment securities sold 241,537 3,157 13,572 Fund shares sold 1,132 -- 67 Interest and dividends 7,057 505 544 Variation Margin 581 -- -- Unrealized appreciation on open swap contracts 8,761 -- -- Expense reimbursements 2 -- -- - --------------------------------------------------------------------------------------------------------------- Total Assets 1,324,519 213,249 45,915 - --------------------------------------------------------------------------------------------------------------- LIABILITIES Payables: Foreign currency due to custodian, at value 394 -- -- Dividends 569 99 36 Investment securities purchased 474,712 5,053 6,592 Fund shares redeemed 1,204 -- 1,863 Variation margin 955 4 3 Unrealized loss on forward foreign currency exchange contracts 215 -- -- Outstanding options written, at fair value 2,382 -- -- Unrealized depreciation on open swap contracts 7,316 -- -- Accrued liabilities: Investment advisory fees 194 26 17 Administration fees 36 -- 2 Shareholder servicing fees 56 -- -- Distribution fees 2 -- -- Custodian fees 48 13 17 Trustees' fees - deferred compensation plan 4 2 --^ Other 147 76 69 - --------------------------------------------------------------------------------------------------------------- Total Liabilities 488,234 5,273 8,599 - --------------------------------------------------------------------------------------------------------------- NET ASSETS $ 836,285 $ 207,976 $ 37,316 - ---------------------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. SEE NOTES TO FINANCIAL STATEMENTS. 74
ENHANCED EMERGING BOND INCOME MARKETS DEBT FUND FUND FUND NET ASSETS Paid in capital $ 821,852 $ 214,498 $ 30,574 Accumulated undistributed (overdistributed) net investment income (3,494) (53) -- Accumulated net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps 9,347 (6,348) 3,898 Net unrealized appreciation (depreciation) of investments, futures, foreign exchange translations, written options and swaps 8,580 (121) 2,844 - --------------------------------------------------------------------------------------------------------------- Total Net Assets $ 836,285 $ 207,976 $ 37,316 - --------------------------------------------------------------------------------------------------------------- Class A $ 3,414 $ -- $ -- Class B $ 1,742 $ -- $ -- Class C $ 216 $ -- $ -- Institutional $ 284,328 $ 207,976 $ -- Select $ 188,358 $ -- $ 37,316 Ultra $ 358,227 $ -- $ -- - --------------------------------------------------------------------------------------------------------------- Total $ 836,285 $ 207,976 $ 37,316 - --------------------------------------------------------------------------------------------------------------- Shares of beneficial interest outstanding ($0.001 par value; unlimited number of shares authorized): Class A Shares 348 -- -- Class B Shares 179 -- -- Class C Shares 22 -- -- Institutional 29,296 21,158 -- Select 19,394 -- 4,169 Ultra 36,893 -- -- Net Asset Value: Class A Shares (and redemption price) $ 9.80 $ -- $ -- Class B Shares* $ 9.74 $ -- $ -- Class C Shares* $ 9.80 $ -- $ -- Institutional (and redemption price) $ 9.71 $ 9.83 $ -- Select (and redemption price) $ 9.71 $ -- $ 8.95 Ultra (and redemption price) $ 9.71 $ -- $ -- Class A Maximum Public Offering Price Per Share (net asset value per share/95.5%) $ 10.26 $ -- $ -- Cost of investments $ 1,056,248 $ 208,372 $ 27,506 Cost of foreign currency $ -- $ -- $ 90 Cost of foreign currency due to custodian $ 396 $ -- $ -- - --------------------------------------------------------------------------------------------------------------- Premiums received from options written $ 2,275 $ -- $ -- - ---------------------------------------------------------------------------------------------------------------
* Redemption price may be reduced by contingent deferred sales charge. SEE NOTES TO FINANCIAL STATEMENTS. 75
GLOBAL STRATEGIC SHORT TERM SHORT TERM INCOME BOND BOND FUND FUND FUND II ASSETS Investment in non-affiliates, at value $ 46,840 $ 671,029 $ 1,007,836 Investment in affiliates, at value 4,911 59,374 8,009 - --------------------------------------------------------------------------------------------------------------- Total investment securities, at value 51,751 730,403 1,015,845 - --------------------------------------------------------------------------------------------------------------- Cash -- 1,772 -- Foreign currency, at value 68 -- -- Receivables: Investment securities sold 6,910 315 -- Fund shares sold 3 93 352 Interest and dividends 582 6,378 8,025 Variation margin 5 912 444 Unrealized appreciation on open swap contracts -- 1,479 2,138 Unrealized gain on forward foreign currency exchange contracts 11 -- -- - --------------------------------------------------------------------------------------------------------------- Total Assets 59,330 741,352 1,026,804 - --------------------------------------------------------------------------------------------------------------- LIABILITIES Payables: Due to custodian 1,081 -- 2,337 Foreign currency due to custodian, at value -- 516 -- Dividends 34 736 2,191 Investment securities purchased 11,768 18,971 5,173 Fund shares redeemed 49 1,474 5,652 Variation margin -- 480 655 Unrealized loss on forward foreign currency exchange contracts 50 30 -- Unrealized depreciation on open swap contracts -- 1,945 1,978 Accrued liabilities: Investment advisory fees 1 137 195 Administration fees -- 2 83 Shareholder servicing fees 2 19 148 Distribution fees 9 1 144 Custodian fees 33 27 45 Trustees' fees - deferred compensation plan --^ 4 8 Other 145 133 127 - --------------------------------------------------------------------------------------------------------------- Total Liabilities 13,172 24,475 18,736 - --------------------------------------------------------------------------------------------------------------- NET ASSETS $ 46,158 $ 716,877 $ 1,008,068 - ---------------------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. SEE NOTES TO FINANCIAL STATEMENTS. 76
GLOBAL STRATEGIC SHORT TERM SHORT TERM INCOME BOND BOND FUND FUND FUND II NET ASSETS Paid in capital $ 71,294 $ 727,693 $ 1,026,502 Accumulated undistributed (overdistributed) net investment income (141) 914 (2,213) Accumulated net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps (25,837) (5,082) (4,696) Net unrealized appreciation (depreciation) of investments, futures, foreign exchange translations and swaps 842 (6,648) (11,525) - --------------------------------------------------------------------------------------------------------------- Total Net Assets $ 46,158 $ 716,877 $ 1,008,068 - --------------------------------------------------------------------------------------------------------------- Class A $ 3,831 $ 3,488 $ 48,729 Class B $ 7,319 $ -- $ -- Class C $ 2,907 $ -- $ -- Class M $ 6,492 $ -- $ 496,833 Institutional $ 23,160 $ 613,029 $ -- Select $ 2,449 $ 100,360 $ 462,506 - --------------------------------------------------------------------------------------------------------------- Total $ 46,158 $ 716,877 $ 1,008,068 - --------------------------------------------------------------------------------------------------------------- Shares of beneficial interest outstanding ($0.001 par value; unlimited number of shares authorized): Class A Shares 414 359 4,838 Class B Shares 792 -- -- Class C Shares 314 -- -- Class M Shares 703 -- 49,325 Institutional 2,506 63,100 -- Select 265 10,331 45,844 Net Asset Value: Class A Shares (and redemption price) $ 9.24 $ 9.71 $ 10.07 Class B Shares* $ 9.24 $ -- $ -- Class C Shares* $ 9.24 $ -- $ -- Class M Shares (and redemption price) $ 9.24 $ -- $ 10.07 Institutional (and redemption price) $ 9.24 $ 9.71 $ -- Select (and redemption price) $ 9.24 $ 9.71 $ 10.09 Class A Maximum Public Offering Price Per Share (net asset value per share/95.5%) $ 9.68 $ -- $ -- Class A Maximum Public Offering Price Per Share (net asset value per share/97.0%) $ -- $ 10.01 $ 10.38 Class M Maximum Public Offering Price Per Share (net asset value per share/97.0%) $ 9.53 $ -- $ -- Class M Maximum Public Offering Price Per Share (net asset value per share/98.5%) $ -- $ -- $ 10.22 Cost of investments $ 50,869 $ 736,335 $ 1,027,060 - --------------------------------------------------------------------------------------------------------------- Cost of foreign currency $ 67 $ -- $ -- - --------------------------------------------------------------------------------------------------------------- Cost of foreign currency due to custodian $ -- $ 520 $ -- - ---------------------------------------------------------------------------------------------------------------
* Redemption price may be reduced by contingent deferred sales charge. SEE NOTES TO FINANCIAL STATEMENTS. 77 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 28, 2005 (Amounts in thousands)
ENHANCED EMERGING BOND INCOME MARKETS DEBT FUND FUND FUND INVESTMENT INCOME Interest $ 16,744 $ 3,312 $ 1,465 Dividend -- 24 -- Dividend income from affiliated investments* 499 61 10 Foreign taxes withheld (3) (2) -- - --------------------------------------------------------------------------------------------------------------- Total investment income 17,240 3,395 1,475 - --------------------------------------------------------------------------------------------------------------- EXPENSES Investment advisory fees 1,255 349 129 Administration fees 620 207 27 Shareholder servicing fees 470 139 46 Distribution fees 12 -- -- Custodian fees 60 19 31 Interest expense -- --^ 1 Printing and postage 22 6 2 Professional fees 66 43 50 Registration expenses 43 10 12 Transfer agent fees 62 9 12 Trustees' fees 6 2 --^ Other 28 10 5 - --------------------------------------------------------------------------------------------------------------- Total expenses 2,644 794 315 - --------------------------------------------------------------------------------------------------------------- Less amounts waived 538 512 83 Less earnings credits 13 3 --^ Less expense reimbursements 22 -- -- - --------------------------------------------------------------------------------------------------------------- Net expenses 2,071 279 232 - --------------------------------------------------------------------------------------------------------------- Net investment income 15,169 3,116 1,243 - ---------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 78
ENHANCED EMERGING BOND INCOME MARKETS DEBT FUND FUND FUND REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on transactions from: Investments 10,016 66 4,724 Futures (114) 31 (29) Foreign exchange contracts 121 -- (3) Written options (444) -- -- Swaps 3,793 -- -- Change in net unrealized appreciation (depreciation) of: Investments (8,297) (263) (1,857) Futures (649) 2 (10) Foreign currency translations (210) -- 1 Written options 2,063 -- -- Swaps 270 -- -- Net realized and unrealized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps 6,549 (164) 2,826 - --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from operations $ 21,718 $ 2,952 $ 4,069 - --------------------------------------------------------------------------------------------------------------- * Includes reimbursements of investment advisory, administration and shareholder servicing fees : $ 47 $ 6 $ 1 - ---------------------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. SEE NOTES TO FINANCIAL STATEMENTS. 79
GLOBAL STRATEGIC SHORT TERM SHORT TERM INCOME BOND BOND FUND FUND FUND II INVESTMENT INCOME Interest $ 757 $ 12,457 $ 18,238 Dividend -- 256 -- Dividend income from affiliated investments* 59 357 317 Foreign taxes withheld -- (23) (8) - --------------------------------------------------------------------------------------------------------------- Total investment income 816 13,047 18,547 - --------------------------------------------------------------------------------------------------------------- EXPENSES Investment advisory fees 73 897 1,355 Administration fees 24 532 804 Shareholder servicing fees 19 431 1,355 Distribution fees 3 4 1,041 Custodian fees 42 44 63 Interest expense --^ -- --^ Printing and postage 1 16 30 Professional fees 40 52 66 Registration expenses 14 19 18 Transfer agent fees 20 40 52 Trustees' fees --^ 5 8 Other 4 26 35 - --------------------------------------------------------------------------------------------------------------- Total expenses 240 2,066 4,827 - --------------------------------------------------------------------------------------------------------------- Less amounts waived 111 840 651 Less earnings credits 1 5 6 Less expense reimbursements 13 8 -- - --------------------------------------------------------------------------------------------------------------- Net expenses 115 1,213 4,170 - --------------------------------------------------------------------------------------------------------------- Net investment income 701 11,834 14,377 - ---------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 80
GLOBAL STRATEGIC SHORT TERM SHORT TERM INCOME BOND BOND FUND FUND FUND II REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on transactions from: Investments 1,299 (766) (1,986) Futures 51 (1,154) 135 Foreign exchange contracts (134) (141) -- Written options -- 18 10 Swaps -- (1,322) (1,245) Change in net unrealized appreciation (depreciation) of: Investments (549) (5,668) (11,442) Futures (31) 195 (404) Foreign currency translations (52) (23) -- Swaps -- 45 556 Net realized and unrealized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps 584 (8,816) (14,376) - --------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from operations $ 1,285 $ 3,018 $ 1 - --------------------------------------------------------------------------------------------------------------- * Includes reimbursements of investment advisory, administration and shareholder servicing fees : $ 6 $ 32 $ 27 - ---------------------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. SEE NOTES TO FINANCIAL STATEMENTS. 81 STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIODS INDICATED (Amounts in thousands)
BOND FUND ENHANCED INCOME FUND ------------------------------ ------------------------------ SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED 2/28/05 8/31/04 2/28/05 8/31/04 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 15,169 $ 35,765 $ 3,116 $ 5,561 Net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps 13,372 23,049 97 (1,528) Change in net unrealized appreciation (depreciation) of investments, futures, foreign currency translations, written options and swaps (6,823) 14,183 (261) 330 - -------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations 21,718 72,997 2,952 4,363 - -------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (18,302) (35,799) (3,064) (5,541) Net realized gain on investment transactions (25,251) (34,209) -- -- - -------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders (43,553) (70,008) (3,064) (5,541) - -------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: Increase (decrease) (34,736) (344,128) (85,664) (59,478) - -------------------------------------------------------------------------------------------------------------------------- NET ASSETS: Total increase (decrease) in net assets (56,571) (341,139) (85,776) (60,656) - -------------------------------------------------------------------------------------------------------------------------- Beginning of period 892,856 1,233,995 293,752 354,408 - -------------------------------------------------------------------------------------------------------------------------- End of period $ 836,285 $ 892,856 $ 207,976 $ 293,752 - -------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (overdistributed) net investment income $ (3,494) $ (361) $ (53) $ (105) - --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 82
EMERGING MARKETS DEBT GLOBAL STRATEGIC INCOME FUND FUND ------------------------------ ------------------------------ SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED 2/28/05 8/31/04 2/28/05 8/31/04 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 1,243 $ 3,228 $ 701 $ 3,878 Net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps 4,692 6,497 1,216 6,443 Change in net unrealized appreciation (depreciation) of investments, futures, foreign currency translations, written options and swaps (1,866) (2,578) (632) (4,212) - -------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations 4,069 7,147 1,285 6,109 - -------------------------------------------------------------------------------------------------------------------------- Net equalization credits/(debits) -- -- --^ -- - -------------------------------------------------------------------------------------------------------------------------- ^ Amount rounds to less than one thousand. DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (1,372) (3,506) (694) (3,871) Net realized gain on investment transactions (4,588) -- -- -- - -------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders (5,960) (3,506) (694) (3,871) - -------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: Increase (decrease) 3,062 (27,807) 3,023 (70,427) - -------------------------------------------------------------------------------------------------------------------------- NET ASSETS: Total increase (decrease) in net assets 1,171 (24,166) 3,614 (68,189) - -------------------------------------------------------------------------------------------------------------------------- Beginning of period 36,145 60,311 42,544 110,733 - -------------------------------------------------------------------------------------------------------------------------- End of period $ 37,316 $ 36,145 $ 46,158 $ 42,544 - -------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (overdistributed) net investment income $ -- $ 129 $ (141) $ (148) - --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 83
SHORT TERM BOND FUND SHORT TERM BOND FUND II ------------------------------ ------------------------------ SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED 2/28/05 8/31/04 2/28/05 8/31/04 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 11,834 $ 20,769 $ 14,377 $ 27,977 Net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps (3,365) 3,116 (3,086) 1,244 Change in net unrealized appreciation/ depreciation of investments, futures, written options and swaps (5,451) (5,507) (11,290) (5,601) - -------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations 3,018 18,378 1 23,620 - -------------------------------------------------------------------------------------------------------------------------- Net equalization credits/(debits) -- -- (197) (357) - -------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (12,954) (20,381) (14,142) (27,690) Return of Capital -- -- -- (149) - -------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders (12,954) (20,381) (14,142) (27,839) - -------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: Increase (decrease) (12,409) (195,985) (168,538) (358,251) - -------------------------------------------------------------------------------------------------------------------------- NET ASSETS: Total increase (decrease) in net assets (22,345) (197,988) (182,876) (362,827) - -------------------------------------------------------------------------------------------------------------------------- Beginning of period 739,222 937,210 1,190,944 1,553,771 - -------------------------------------------------------------------------------------------------------------------------- End of period $ 716,877 $ 739,222 $ 1,008,068 $ 1,190,944 - -------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (overdistributed) net investment income $ 914 $ 2,034 $ (2,213) $ (2,251) - --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 84 JPMORGAN FUNDS NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION J.P. Morgan Mutual Fund Group ("MFG") and JPMorgan Trust I ("JPM I") (the "Trusts") were organized as a Massachusetts business trust and Delaware statutory trust, respectively. The Trusts are registered under the Investment Company Act of 1940, as amended, (the "1940 Act"), as open-end management investment companies. The Trusts were organized on the following dates:
TRUST DATE MFG May 11, 1987 JPM I November 12, 2004
The following are six separate portfolios of the Trusts (collectively, the "Funds").
FUND CLASSES OFFERED JPMorgan Bond Fund ("BF") Class A, Class B, Class C, Institutional, Select and Ultra JPMorgan Enhanced Income Fund ("EIF") Institutional JPMorgan Emerging Markets Debt Fund ("EMDF") Select JPMorgan Global Strategic Income Fund ("GSIF") Class A, Class B, Class C, Class M, Institutional and Select JPMorgan Short Term Bond Fund ("STBF") Class A, Institutional and Select JPMorgan Short Term Bond Fund II ("STBFII") Class A, Class M and Select
The Funds, excluding STBFII, are separate series of JPM I. STBFII is a separate series of MFG. Prior to February 19, 2005 BF, GSIF, and STBF were separate series of J.P. Morgan Institutional Funds. EIF was a separate series of J.P. Morgan Series Trust. EMDF was a separate series of J.P. Morgan Funds. On August 19, 2004, the Boards of Trustees of the then existing Trusts each approved Agreements and Plans of Reorganization regarding the reorganization of each series of their respective Trust into a corresponding series of J.P. Morgan Mutual Fund Series ("JPMMFS"). At a special meeting of shareholders of JPMorgan Bond Fund, JPMorgan Enhanced Income Fund, JPMorgan Emerging Markets Debt Fund, JPMorgan Global Strategic Income Fund and JPMorgan Short Term Bond Fund (the "Funds") held on January 20, 2005, and adjourned and reconvened on February 3, 2005, shareholders of each of the Funds approved the Agreement and Plan of Reorganization with respect to each respective Fund. Effective as of 5:00 p.m. on February 18, 2005 pursuant to the Agreement and Plan of Reorganization, the Funds were each reorganized, by means of a tax-free reorganization, each as a separate series of JPMMFS. Additionally, at a special meeting of shareholders on January 20, 2005, the shareholders of JPMMFS approved an Agreement and Plan of Reorganization and Redomiciliation providing for the reorganization and redomiciliation of each series of JPMMFS as a corresponding series of JPMorgan Trust I, a Delaware statutory trust, including those series of JPMMFS such as the Funds which became a series of JPMMFS as of February 18, 2005. Therefore, effective as of 5:00 p.m. on February 18, 2005, pursuant to the Agreement and Plan of Reorganization and Redomiciliation, the Funds were each reorganized and redomiciled, by means of a tax-free reorganization, as a separate series of JPMorgan Trust I. Effective February 19, 2005, JPMorgan Fleming Emerging Markets Debt Fund changed its name to JPMorgan Emerging Markets Debt Fund. Class A and Class M shares generally provide for a front-end sales charge while Class B and Class C shares provide for a contingent deferred sales charge. Class B shares automatically convert to Class A shares after eight years. No sales charges are assessed with respect to Institutional, Ultra 85 and Select classes. All classes of shares have equal rights as to earnings, assets and voting privileges except that each class may bear different distribution and shareholder servicing fees and each class has exclusive voting rights with respect to its distribution plan and shareholder servicing agreements. Class A shares for which front-end sales charges have been waived, may be subject to redemption charges as described in the Funds' prospectus. On November 11, 2004, the Board of Trustees approved the increase of the maximum front-end sales charge for Class A shares from 1.50% to 3.00% for STBF and STBFII, for shares purchased on or after November 15, 2004. 2. REORGANIZATION On August 19, 2004, the Board of Trustees of the then existing Trusts approved management's proposal to merge the JPMorgan Strategic Income Fund (the "Target Fund") into the JPMorgan Global Strategic Income Fund (the "Acquiring Fund"). The Agreement and Plan of Reorganization with respect to the JPMorgan Strategic Income Fund was approved by the Fund's shareholders at a special meeting of shareholders held on January 20, 2005, and adjourned and reconvened on February 3, 2005. The merger was effective after the close of business on February 18, 2005. The Acquiring Fund acquired all the assets and liabilities of the Target Fund as shown in the table below. The transaction was structured for tax purposes to qualify as a tax-free reorganization under the Internal Revenue Code of 1986. Pursuant to the Agreement and Plan of Reorganization, shareholders of the Target Fund received the number of shares of the corresponding class in the Acquiring Fund with a value equal to their holdings in the Target Fund as of the close of business on the date of the reorganization. The following is a summary of Shares Outstanding, Net Assets, Net Asset Values Per Share and Net Unrealized Appreciation immediately before and after the Reorganization (amounts in thousands, except per share amounts): JPMORGAN GLOBAL STRATEGIC INCOME FUND REORGANIZATION
NET ASSET NET SHARES VALUE UNREALIZED OUTSTANDING NET ASSETS PER SHARE APPRECIATION TARGET FUND JPMorgan Strategic Income Fund $ 828 Class A 322 $ 3,011 $ 9.34 Class B 784 $ 7,328 $ 9.35 Class C 313 $ 2,925 $ 9.35 Class M 698 $ 6,507 $ 9.32 ACQUIRING FUND JPMorgan Global Strategic Income Fund $ 360 Class A 89 $ 827 $ 9.26 Institutional 2,506 $ 23,220 $ 9.27 Select 270 $ 2,502 $ 9.26 POST REORGANIZATION JPMorgan Global Strategic Income Fund $ 1,188 Class A 414 $ 3,838 $ 9.26 Class B 792 $ 7,328 $ 9.26 Class C 316 $ 2,925 $ 9.26 Class M 702 $ 6,507 $ 9.26 Institutional 2,506 $ 23,220 $ 9.27 Select 270 $ 2,502 $ 9.26
86 3. SIGNIFICANT ACCOUNTING POLICIES THE FOLLOWING IS A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY THE FUNDS: The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. VALUATION OF INVESTMENTS -- Fixed income securities, other than convertible bonds, with a maturity of 61 days or more, will be valued each day based on readily available market quotations received from independent or affiliated commercial pricing services. Such pricing services will generally provide bidside quotations. Convertible bonds are valued at the last sale price on the primary exchange on which the bond is principally traded. Purchased options and futures contracts are valued at the last sale price on the exchange on which they are primarily traded. All short-term securities with a remaining maturity of sixty days or less are valued using the amortized cost method, which approximates market value. When valuations are not readily available, securities are valued at fair value as determined in accordance with procedures adopted by the Trustees. Valuations may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry. It is possible that the estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and such differences could have been material. B. FUTURES CONTRACTS -- When a Fund enters into a futures contract, it makes an initial margin deposit in a segregated account, either in cash or liquid securities. Thereafter, the futures contract is marked to market and the Fund makes (or receives) additional cash payments daily to (or from) the broker. Changes in the value of the contract are recorded as unrealized appreciation (depreciation) until the contract is closed or settled, at which time a realized gain or loss is recognized. The Funds may invest in exchange-traded interest rate futures for hedging purposes, to either modify the duration of the portfolio, modify the yield curve exposure of the portfolio, or in anticipation of buying or selling a specific security. Use of long futures contracts subjects the Funds to risk of loss in excess of amounts shown on the Statement of Assets and Liabilities up to the notional value of the futures contracts. Use of short futures contracts subjects the Funds to unlimited risk of loss. The Funds may enter into futures contracts only on exchanges or boards of trade. The exchange or board of trade acts as the counterparty to each futures transaction; therefore, the Fund's credit risk is limited to failure of the exchange or board of trade. As of February 28, 2005, the Funds had outstanding futures contracts as listed on the Funds' Portfolios of Investments. C. FOREIGN CURRENCY TRANSLATION -- The books and records of the Funds are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the prevailing exchange rates, or at the mean of the current bid and asked prices, of such currencies against the U.S. dollar as quoted by a major bank, on the following basis: 1. Market value of investment securities and other assets and liabilities: at the rate of exchange at the valuation date. 2. Purchases and sales of investment securities, income and expenses: at the rates of exchange prevailing on the respective dates of such transactions. Although the net assets of the Funds are presented at the foreign exchange rates and market values at the close of the periods, the Funds do not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held or sold 87 during the year. Accordingly, such realized foreign currency gains (losses) are included in the reported net realized gains (losses) on investment transactions. Reported realized foreign currency gains or losses arise from disposition of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on each Fund's books on the transaction date and the U.S. dollar equivalent of the amounts actually received or paid. Unrealized foreign exchange gains and losses arise from changes (due to the changes in the exchange rate) in the value of foreign currency and other assets and liabilities denominated in foreign currencies, which are held at period end. D. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Funds may enter into forward foreign currency exchange contracts (obligations to purchase or sell foreign currency in the future on a date and price fixed at the time the contracts are entered into) to manage the Fund's exposure to foreign currency exchange fluctuations. The forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized appreciation or depreciation until the contract settlement date. When the forward contract is closed, or the delivery of the currency is made or taken, each Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund's basis in the contract. The Funds are subject to off-balance sheet risk to the extent of the value of the contracts for purchases of foreign currency and in an unlimited amount for sales of foreign currency. As of February 28, 2005, the Funds had outstanding forward foreign currency exchange contracts as listed on the Funds' Portfolios of Investments. E. WRITTEN OPTIONS -- When a Fund writes an option, an amount equal to the premium received by the Fund is included in the Fund's Statement of Assets and Liabilities as an asset and corresponding liability. The amount of the liability is adjusted daily to reflect the current market value of the written option and the change is recorded in a corresponding unrealized gain or loss account. When a written option expires on its stipulated expiration date, or when a closing transaction is entered into, the related liability is extinguished and the Fund realizes a gain or loss contingent on whether the cost of the closing transaction exceeds the premium received when the option was written. The Funds write options on securities, futures and interest rate swaps ("swaptions"). These options are generally settled for cash and subject the Funds to unlimited risk of loss. The Funds, however, are not subject to credit risk on written options as the counterparty has already performed its obligation by paying the premium at the inception of the contract. As of February 28, 2005, the Funds had written options contracts outstanding as listed on the Funds' Portfolios of Investments. 88 Transactions in options written during the six months ended February 28, 2005, were as follows (amounts in thousands):
BF STBF STBF II ---------------------- --------------------- --------------------- NUMBER OF PREMIUMS NUMBER OF PREMIUMS NUMBER OF PREMIUMS UNITS RECEIVED UNITS RECEIVED UNITS RECEIVED Options outstanding at August 31, 2004 (507,318) $ 2,803 -- $ -- -- $ -- Options written (1,473,603) 9,435 (300,000) 270 (225,000) 202 Options expired or terminated in closing purchase transactions 1,696,218 (9,963) 300,000 (270) 225,000 (202) Options exercised -- -- -- -- -- -- Options outstanding at February 28, 2005 (284,703) $ 2,275 -- $ -- -- $ --
F. SWAPS -- The Funds may engage in various swap transactions, including forward rate agreements, interest rate, currency, fixed income, index, credit default and total return swaps, primarily to manage duration and yield curve risk, or as alternatives to direct investments. Unrealized gains are reported as an asset and unrealized losses are reported as a liability on the Statement of Assets and Liabilities. The change in value of swaps, including accruals of periodic amounts of interest to be paid or received on swaps is reported as unrealized gains or losses in the Statement of Operations. A realized gain or loss is recorded upon payment or receipt of a periodic payment or termination of swap agreements. Swap agreements are stated at fair value. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. As of February 28, 2005, the Funds had outstanding swap agreements as listed on the Funds' Portfolios of Investments. Swap transactions present risk of loss in excess of the related amounts included in the Statement of Assets and Liabilities. G. COMMITMENTS -- The Funds may enter into commitments to buy and sell investments to settle on future dates as part of their normal investment activities. These commitments are reported at market value in the financial statements. Credit risk exists on these commitments to the extent of any unrealized gains on the underlying securities purchased and any realized gains on the underlying securities sold. Market risk exists on commitments to buy to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. However, during the commitment period, these investments earn no interest or dividends. H. DOLLAR ROLLS -- The Funds may enter into dollar rolls principally using To Be Announced (TBA) securities, in which the Funds sell mortgage securities for delivery in the current month and simultaneously contract to repurchase similar, but not identical, securities at an agreed-upon price on a fixed date. The Funds account for such dollar rolls as purchases and sales and receive compensation as consideration for entering into the commitment to repurchase. The Funds must maintain liquid securities having a value not less than the repurchase price (including accrued interest) for such dollar rolls. The market value of the securities that a Fund is required to purchase may decline below the agreed upon repurchase price of those securities. 89 In a "fee based" roll, the compensation is recorded as deferred income and amortized to income over the roll period. The counterparty receives all principal and interest payments, including prepayments, made in respect of a security subject to such a contract while it is the holder. Mortgage dollar rolls may be renewed with a new purchase and repurchase price and a cash settlement made on settlement date without physical delivery of the securities subject to the contract. The Funds engage in dollar rolls for the purpose of enhancing their yields, principally by earning a negotiated fee. As of February 28, 2005, the Funds had no fee based Dollar Rolls outstanding. I. RESTRICTED AND ILLIQUID SECURITIES -- The Funds are permitted to invest in securities that are subject to legal or contractual restrictions on resale or are illiquid. Restricted securities generally may be resold in transactions exempt from registration. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at the current valuation may be difficult. The following is the market value and percentage of net assets of restricted and illiquid securities (amounts in thousands).
ILLIQUID RESTRICTED * FUND BF $ 27,803 3.33% $ 170,953 20.44% EIF 11,330 5.45% 60,833 29.25% EMDF -- -- 4,720 12.65% GSIF 2,522 5.47% 5,993 12.98% STBF 28,749 4.01% 166,947 23.29% STBFII 29,678 2.95% 215,355 21.37%
* Includes Illiquid Securities J. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Investment transactions are accounted for on the trade date (the date the order to buy or sell is executed). Securities gains and losses are calculated on the identified cost basis. Interest income is determined on the basis of coupon interest accrued using the interest method adjusted for amortization of premiums and accretion of discounts. Dividend income less foreign taxes withheld (if any) is recorded on the ex-dividend date or when the Funds first learn of the dividend. Purchases of TBA, when-issued or delayed delivery securities may be settled a month or more after the trade date; interest income is not accrued until settlement date. It is each Fund's policy to segregate assets with a current value at least equal to the amount of its TBA, when-issued or delayed delivery purchase commitments. K. ALLOCATION OF INCOME AND EXPENSES -- Expenses directly attributable to a Fund are charged to that Fund; other expenses of the Trusts are allocated proportionately among each of the Funds within the Trusts in relation to the net assets of each Fund or on another reasonable basis. Expenses directly attributable to a particular class are charged directly to such class. In calculating the net asset value per share of each class, investment income, realized and unrealized gains and losses and expenses other than class specific expenses are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. L. FEDERAL INCOME TAXES -- Each Fund is treated as a separate taxable entity for Federal income tax purposes. Each Fund's policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders all of their distributable net investment income and net realized gain on investments. In addition, the Funds intend to make distributions as required to avoid excise taxes. Accordingly, no provision for Federal income or excise tax is necessary. 90 M. FOREIGN TAXES -- The Funds may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Funds will accrue such taxes and recoveries as applicable, based upon their current interpretation of tax rules and regulations that exist in the markets in which they invest. N. DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions paid to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains is determined in accordance with Federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. To the extent these "book/tax" differences are permanent in nature, (i.e., that they result from other than timing of recognition "temporary differences") such amounts are reclassified within the capital accounts based on their Federal tax-basis treatment. O. EQUALIZATION -- STBFII and GSIF (after the reorganization) use the accounting practice known as equalization by which a portion of the proceeds from sales and costs of redemptions of Trust shares of beneficial interest equivalent, on a per-share basis, to the amount of undistributed net investment income on the date of the transaction, is credited or charged to undistributed net investment income. As a result, undistributed net investment income per share is unaffected by sales or redemptions of Trust shares. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES A. INVESTMENT ADVISORY FEE -- Pursuant to the Investment Advisory agreement, J.P. Morgan Investment Management, Inc. "JPMIM" acts as the investment advisor to the Funds. JPMIM is a wholly-owned subsidiary of JPMorgan Fleming Asset Management Holdings, Inc., which is a wholly-owned subsidiary of JPMorgan Chase & Co. ("JPMorgan"). The Advisor supervises the investments of each respective Fund and for such services is paid a fee. The fee is accrued daily and paid monthly based on each Fund's respective average daily net assets. The annual fee rate for each Fund is as follows:
INVESTMENT ADVISORY FEE (%) FUND BF 0.30% EIF 0.25% EMDF 0.70% GSIF 0.45% STBF 0.25% STBFII 0.25%
The Advisor waived fees as outlined in Note 4.F. The Funds may invest in one or more of the affiliated JPMorgan Money Market Funds. The Advisor has agreed to waive and/or reimburse its advisory fee from the Funds in an amount sufficient to offset any doubling up of investment advisory, administration and shareholder servicing fees related to each Fund's investment in an affiliated money market fund. B. DISTRIBUTION FEES -- Effective February 19, 2005, pursuant to a Distribution Agreement with JPMorgan Distribution Services, Inc. ("JPMDS" or "Distributor"), a wholly-owned subsidiary of JPMorgan Chase & Co., serves as the Trusts' exclusive underwriter and promotes and arranges for the sale of each Fund's shares. JPMDS receives no compensation in its capacity as the Funds' underwriter. 91 Prior to February 19, 2005, J.P. Morgan Fund Distributors, Inc. ("JPMFD"), a wholly-owned subsidiary of The BISYS Group, Inc., served as the Funds' exclusive underwriter. JPMFD received no compensation in its capacity as the Funds' underwriter. The Trustees have adopted a Distribution Plan (the "Distribution Plan") for Class A, B, C and M Shares of the Funds in accordance with Rule 12b-1 under the 1940 Act. The Distribution Plan provides that each Fund shall pay distribution fees, including payments to the Distributor, at annual rates of the average daily net assets as shown in the table below (%):
CLASS A CLASS B CLASS C CLASS M FUND BF 0.25 0.75 0.75 n/a GSIF 0.25 0.75 0.75 0.50 STBF 0.25 n/a n/a n/a STBFII 0.25 n/a n/a 0.35
In addition, JPMDS is entitled to receive the front-end sales charges from purchases of Class A and Class M shares and the contingent deferred sales charges ("CDSC") from redemptions of Class B and Class C shares. For the period 2/19/05 to 2/28/05, JPMDS received the following amounts as Distributor:
FRONT-END SALES (AMOUNTS IN THOUSANDS) 12b-1 CHARGE CDSC FUND BF $ -- $ 4 $ 1 GSIF 2 --^ --^ STBF --^ --^ --^ STBFII 2 1 --
^ Amount rounds to less than one thousand. JPMFD and JPMDS waived Distribution Fees as outlined in Note 4.F. C. SHAREHOLDER SERVICING FEES -- Effective February 19, 2005, the Trusts have entered into a Shareholder Servicing Agreement on behalf of the Funds with JPMDS under which JPMDS provides account administration and personal account maintenance services to the shareholders. For performing these services JPMDS receives a fee that is computed daily and paid monthly equal to a percentage of the average daily net assets as shown in the table below (%):
CLASS A CLASS B CLASS C CLASS M INSTITUTIONAL SELECT ULTRA FUND BF 0.25 0.25 0.25 n/a 0.10 0.25 0.00* EIF n/a n/a n/a n/a 0.10 n/a n/a EMDF n/a n/a n/a n/a n/a 0.25 n/a GSIF 0.25 0.25 0.25 0.30 0.10 0.25 n/a STBF 0.25 n/a n/a n/a 0.10 0.25 n/a STBFII 0.25 n/a n/a 0.25 n/a 0.25 n/a
* Prior to February 19, 2005, the Shareholder Servicing Fee for BF ultra shares was 0.05%. 92 JPMDS may enter into service contracts with certain entities under which it will pay all or a portion of the annual fee to such entities for performing shareholding and administrative services. In addition, JPMDS, Charles Schwab & Co. ("Schwab") and JPM I are parties to separate servicing and operating agreements (the "Schwab Agreements") whereby Schwab makes shares of BF, EIF, EMDF, GSIF and STBF available to customers of investment advisers and other financial intermediaries who are Schwab's clients. BF, EIF, EMDF, GSIF and STBF are not responsible for payments to Schwab under the Schwab Agreements; however, in the event the servicing agreement with Schwab is terminated for reasons other than a breach by Schwab and the relationship between JPM I and JPMDS is terminated, BF, EIF, EMDF, GSIF and STBF would be responsible for the ongoing payments to Schwab with respect to pre-termination shares. Prior to February 19, 2005, JPMorgan Chase Bank, N.A. ("JPMCB") served as the Funds' Shareholder Servicing Agent. JPMCB was subject to the fee rates disclosed in the previous table. JPMCB and JPMDS waived Shareholder Servicing Fees as outlined in Note 4.F. D. CUSTODIAN AND ACCOUNTING FEES -- JPMCB provides portfolio custody and accounting services for the Funds. Compensation for such services is presented in the Statement of Operations as custodian fees. The custodian fees may be reduced by credits earned by each Fund, based on uninvested cash balances held by the custodian. Such earnings credits are presented separately in the Statement of Operations. E. ADMINISTRATION FEE -- Effective February 19,2005, pursuant to an Administration Agreement, JPMorgan Funds Management, Inc. ("JPMFM" or the "Administrator"), an indirect, wholly-owned subsidiary of JPMorgan Chase & Co., provides certain administration services to the Funds. In consideration of these services, the Administrator receives a fee computed daily and paid monthly at an annual rate equal to 0.15% of the first $25 billion of the average daily net assets of all non-money market funds and all non-investor funds in the JPMorgan Fund Complex and 0.075% of the average daily net assets in excess of $25 billion of all such funds. Prior to February 19, 2005, JPMCB served as the Funds' administrator, subject to the same fee arrangements. JPMCB and JPMFM waived Administration Fees and reimbursed expenses as outlined in Note 4.F. BISYS Fund Services, L.P. ("BISYS") serves as the Funds' sub-administrator and will continue to do so until mid-2005. For its services as sub-administrator, BISYS received a portion of the fees paid to the Administrator. Beginning in mid-2005, J.P. Morgan Investor Services, Co. ("JPMIS") will serve as the Funds' sub-administrator. For its services as sub-administrator, JPMIS will receive a portion of the fees payable to the Administrator. F. WAIVERS AND REIMBURSEMENTS -- The Administrator, Advisor and Distributor have contractually agreed to waive fees and reimburse the Funds to the extent that total operating expenses (excluding interest, taxes, extraordinary expenses and expenses related to the deferred compensation plan) exceed the percentages of the Funds' respective average daily net assets as shown in the table below (%):
CLASS A CLASS B CLASS C CLASS M INSTITUTIONAL SELECT ULTRA FUND BF 0.75 1.50 1.50 n/a 0.49 0.69 0.40 EIF n/a n/a n/a n/a 0.25 n/a n/a EMDF n/a n/a n/a n/a n/a 1.25 n/a GSIF* 1.15 1.65 1.65 1.45 0.65 0.90 n/a STBF 0.75 n/a n/a n/a 0.30 0.60 n/a STBFII** 0.75 n/a n/a 0.99 n/a 0.50 n/a
* Prior to February 19, 2005, the contractual expense limitation for GSIF Class A and Select class were 1.25% and 1.00%, respectively. ** Prior to February 19, 2005, the contractual expense limitation for STBFII Class M was 1.00%. 93 The contractual expense limitation agreements were in effect for the six months ended February 28, 2005. The expense limitation percentages in the table above are due to expire on December 31, 2006. For the six months ended February 28, 2005, the Funds' service providers waived fees and contractually reimbursed expenses for each of the Funds as follows (amounts in thousands). None of these parties expects the Funds to repay any such waived fees and reimbursed expenses in future years.
CONTRACTUAL WAIVERS ------------------------------------------------------------------- INVESTMENT SHAREHOLDER CONTRACTUAL ADVISORY ADMINISTRATION SERVICING DISTRIBUTION TOTAL REIMBURSEMENTS BF $ -- $ 408 $ 110 $ -- $ 518 $ 22 EIF 166 137 139 -- 442 -- EMDF 17 20 46 -- 83 -- GSIF 69 24 18 -- 111 13 STBF 37 477 315 --^ 829 8 STBFII -- 215 426 10 651 --
^ Amount rounds to less than one thousand.
VOLUNTARY WAIVERS --------------------------------------------------------- INVESTMENT SHAREHOLDER ADVISORY ADMINISTRATION SERVICING DISTRIBUTION BF $ -- $ 20 $ -- $ -- EIF -- 70 -- -- STBF -- 11 -- --
G. OTHER -- Certain officers of the Trusts are officers of J.P. Morgan Chase & Co. and BISYS or their subsidiaries. Such officers received no compensation from the Funds for serving in their respective roles. During the period, certain Funds may have purchased securities from an underwriting syndicate in which the principal underwriter or members of the syndicate are affiliated with the Advisor. The Funds may use related party broker/dealers. For the six months ended February 28, 2005, STBF incurred approximately (in thousands) $50 as brokerage commissions with brokers/dealers affiliated with JPMorgan. The SEC has granted an exemptive order permitting the Funds to engage in principal transactions with J.P. Morgan Securities, Inc., an affiliated broker, involving taxable money market instruments subject to certain conditions. 94 5. CLASS SPECIFIC EXPENSES The Funds' class specific expenses for the six months ended February 28, 2005 are as follows (amounts in thousands):
SHAREHOLDER SERVICING DISTRIBUTION TRANSFER AGENT * BF Class A $ 4 $ 4 $ 14 Class B 2 7 8 Class C --^ 1 1 Institutional 147 -- 11 Select 233 -- 21 Ultra 84 -- 7 - --------------------------------------------------------------------------- $ 470 $ 12 $ 62 - --------------------------------------------------------------------------- EIF Institutional $ 139 $ -- $ 9 EMDF Select $ 46 $ -- $ 12 GSIF Class A $ 1 $ 1 $ 5 Class B 1 1 -- Class C --^ --^ -- Class M --^ 1 -- Institutional 14 -- 8 Select 3 -- 7 - --------------------------------------------------------------------------- $ 19 $ 3 $ 20 - --------------------------------------------------------------------------- STBF Class A $ 4 $ 4 $ 9 Institutional 311 -- 15 Select 116 -- 16 - --------------------------------------------------------------------------- $ 431 $ 4 $ 40 - --------------------------------------------------------------------------- STBFII Class A $ 65 $ 65 $ 34 Class M 697 976 6 Select 593 -- 12 - --------------------------------------------------------------------------- $ 1,355 $ 1,041 $ 52 - ---------------------------------------------------------------------------
^ Amount rounds to less than one thousand. * Effective February 19, 2005, the Funds no longer bear class specific charges relating to Transfer Agent fees. The amounts in the table above relate to the fees charged to each specific class prior to February 19, 2005. 95 6. CLASS SPECIFIC DISTRIBUTIONS The Funds' class specific distributions from net investment income and realized gain on investment transactions for the six months ended February 28, 2005 and the year ended August 31, 2004 are as follows (amounts in thousands):
SIX MONTHS ENDED 2/28/05 YEAR ENDED 8/31/04 --------------------------------- ------------------------------------ NET NET INVESTMENT INCOME REALIZED GAIN INVESTMENT INCOME REALIZED GAIN BF Class A $ 61 $ 91 $ 78 $ 71 Class B 26 55 58 76 Class C 3 6 7 9 Institutional 6,446 8,858 13,088 11,950 Select 3,840 5,644 7,804 8,959 Ultra 7,926 10,597 14,764 13,144 - ---------------------------------------------------------------------------------------------------- $ 18,302 $ 25,251 $ 35,799 $ 34,209 - ---------------------------------------------------------------------------------------------------- EIF Institutional $ 3,064 $ -- $ 5,541 $ -- EMDF Select $ 1,372 $ 4,588 $ 3,506 $ -- GSIF Class A $ 18 $ -- $ 28 $ -- Class B 6 -- -- -- Class C 2 -- -- -- Class M 6 -- -- -- Institutional 615 -- 3,689 -- Select 47 -- 154 -- - ---------------------------------------------------------------------------------------------------- $ 694 $ -- $ 3,871 $ -- - ---------------------------------------------------------------------------------------------------- STBF Class A $ 47 $ -- $ 131 $ -- Institutional 11,396 -- 17,897 -- Select 1,511 -- 2,353 -- - ---------------------------------------------------------------------------------------------------- $ 12,954 $ -- $ 20,381 $ -- - ---------------------------------------------------------------------------------------------------- STBFII Class A $ 688 $ -- $ 955(a) $ -- Class M 6,537 -- 15,711(a) -- Select 6,917 -- 11,173(a) -- - ---------------------------------------------------------------------------------------------------- $ 14,142 $ -- $ 27,839 $ -- - ----------------------------------------------------------------------------------------------------
(a) Includes return of capital of $7, $80 and $62 for Class A, M and Select, respectively (amounts in thousands). 96 7. INVESTMENT TRANSACTIONS For the six months ended February 28, 2005, purchases and sales of investments (excluding short-term investments) were as follows (amounts in thousands):
PURCHASES SALES PURCHASES SALES (EXCLUDING U.S. (EXCLUDING U.S. OF U.S. OF U.S. GOVERNMENT) GOVERNMENT) GOVERNMENT GOVERNMENT BF $ 268,151 $ 256,957 $ 2,118,985 $ 2,113,673 EIF 118,239 192,008 -- 948 EMDF 4,009 5,158 59,924 65,700 GSIF 4,928 13,112 73,527 69,290 STBF 212,140 292,376 167,856 141,717 STBFII 311,185 484,497 190,270 173,446
8. FEDERAL INCOME TAX MATTERS For Federal income tax purposes, the cost and unrealized appreciation (depreciation) in value of the investment securities at February 28, 2005 are as follows (amounts in thousands):
GROSS GROSS NET UNREALIZED AGGREGATE UNREALIZED UNREALIZED APPRECIATION COST APPRECIATION DEPRECIATION (DEPRECIATION) BF $ 1,056,248 $ 16,343 $ (8,382) $ 7,961 EIF 208,372 228 (339) (111) EMDF 27,506 2,895 (10) 2,885 GSIF 50,869 2,120 (1,238) 882 STBF 736,335 2,428 (8,360) (5,932) STBFII 1,027,060 2,373 (13,588) (11,215)
9. BORROWINGS Effective February 18, 2005, the Trusts and JPMCB have entered into a financing arrangement. Under this arrangement, JPMCB provides an unsecured, uncommitted credit facility in the aggregate amount of $100 million to certain of the JPMorgan Funds including the Funds. Advances under the arrangement are taken primarily for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. Interest on borrowings is payable at a rate determined by JPMCB at the time of borrowing. Prior to February 18, 2005, the Funds were allowed to borrow money for temporary or emergency purposes, pursuant, to a Line of Credit dated April 17, 2003. This agreement enabled the Funds to participate with other JPMorgan Funds in a line of credit with JPMCB, as administrative agent, and a syndicate of banks, which permitted borrowings up to $250 million, collectively. Interest was charged to each Fund based on its borrowings at an annual rate equal to the sum of the Federal Funds Rate plus 0.50%. The Funds also paid a commitment fee of 0.09% per annum on the average daily amount of the available commitment, which was 97 allocated on a pro-rata basis to the Funds. This agreement was terminated as of February 18, 2005. Effective February 19, 2005, the Funds began relying upon an exemptive order ("Order") permitting the establishment and operation of an Interfund Lending Facility ("Facility"). The Facility allows the Funds to directly lend and borrow money to or from any other fund relying upon the Order at rates beneficial to both the borrowing and lending funds. Advances under the Facility are taken primarily for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities, and are subject to each Fund's borrowing restrictions. The Interfund Loan Rate is determined, as specified in the Order, by averaging the current repurchase agreement rate and the current bank loan rate. The Order was granted to JPMorgan Trust II (formerly One Group Mutual Funds) and may be relied upon by the Funds because they are investment companies in the same "group of investment companies" (as defined in Section 12(d)(1)(G) of the Investment Company Act of 1940). The Funds had no borrowings outstanding at February 28, 2005, nor at any time during the six months then ended. 10. CONCENTRATIONS AND INDEMNIFICATIONS The Funds may have elements of risk not typically associated with investments in the United States of America due to concentrated investments in a limited number of countries or regions, which may vary throughout the year. Such concentrations may subject the Funds to additional risks resulting from political or economic conditions in such countries or regions and the possible imposition of adverse governmental laws or currency exchange restrictions could cause the securities and their markets to be less liquid and their prices more volatile than those of comparable U.S. securities. The ability of the issuers of debt, asset-backed and mortgage-backed securities, along with counterparties to swap and option agreements, to meet their obligations may be affected by the economic and political developments in a specific industry or region. The value of asset-backed and mortgage-backed securities can be significantly affected by changes in interest rates or rapid principal payments including prepayments. As to illiquid investments, a Fund is subject to the risk that should the Fund decide to sell them when a ready buyer is not available at a price the Fund deems representative of their value, the value of the Fund's net assets could be adversely affected. From time to time, the Funds may have a concentration of several shareholders which may be a related party, holding a significant percentage of shares outstanding. Investment activities of these shareholders could have a material impact on the Funds. In the normal course of business, the Funds may enter into contracts that contain a variety of representations which provide general indemnifications. Each Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against each Fund that have not yet occurred. However, based on experience, the Funds can expect the risk of loss to be remote. 98 11. CAPITAL SHARE TRANSACTIONS Capital share transactions were as follows for the periods presented (amounts in thousands):
BOND FUND ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 2005 AUGUST 31, 2004 CLASS A AMOUNT Shares sold $ 753 $ 1,767 Shares issued in reinvestment of distributions 142 143 Shares redeemed (408) (907) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 487 $ 1,003 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 76 177 Shares issued in reinvestment of distributions 14 14 Shares redeemed (41) (91) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 49 100 - --------------------------------------------------------------------------------------------------- CLASS B AMOUNT Shares sold $ 60 $ 237 Shares issued in reinvestment of distributions 36 67 Shares redeemed (284) (836) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (188) $ (532) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 6 24 Shares issued in reinvestment of distributions 4 7 Shares redeemed (29) (86) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (19) (55) - ---------------------------------------------------------------------------------------------------
99
BOND FUND (CONTINUED) ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 2005 AUGUST 31, 2004 CLASS C** AMOUNT Shares sold $ 34 $ 127 Shares issued in reinvestment of distributions 8 14 Shares redeemed (32) (199) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 10 $ (58) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 3 13 Shares issued in reinvestment of distributions 1 1 Shares redeemed (3) (20) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 1 (6) - --------------------------------------------------------------------------------------------------- INSTITUTIONAL AMOUNT Shares sold $ 33,384 $ 75,515 Shares issued in reinvestment of distributions 9,716 15,282 Shares redeemed (69,366) (252,219) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (26,266) $ (161,422) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 3,403 7,584 Shares issued in reinvestment of distributions 997 1,545 Shares redeemed (7,028) (25,296) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (2,628) (16,167) - ---------------------------------------------------------------------------------------------------
** From commencement of offering class shares on March 31, 2003. 100
BOND FUND (CONTINUED) ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 2005 AUGUST 31, 2004 SELECT AMOUNT Shares sold $ 22,424 $ 45,098 Shares issued in reinvestment of distributions 8,713 15,587 Shares redeemed (26,730) (179,415) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 4,407 $ (118,730) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 2,271 4,528 Shares issued in reinvestment of distributions 894 1,575 Shares redeemed (2,712) (18,118) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 453 (12,015) - --------------------------------------------------------------------------------------------------- ULTRA AMOUNT Shares sold $ 32,522 $ 69,894 Shares issued in reinvestment of distributions 16,272 24,753 Shares redeemed (61,980) (159,036) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (13,186) $ (64,389) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 3,290 7,078 Shares issued in reinvestment of distributions 1,669 2,501 Shares redeemed (6,260) (16,016) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (1,301) (6,437) - ---------------------------------------------------------------------------------------------------
101
ENHANCED INCOME FUND ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 2005 AUGUST 31, 2004 INSTITUTIONAL AMOUNT Shares sold $ 35,296 $ 263,773 Shares issued in reinvestment of distributions 2,289 3,814 Shares redeemed (123,249) (327,065) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (85,664) $ (59,478) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 3,589 26,783 Shares issued in reinvestment of distributions 232 388 Shares redeemed (12,527) (33,263) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (8,706) (6,092) - ---------------------------------------------------------------------------------------------------
EMERGING MARKETS DEBT FUND ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 2005 AUGUST 31, 2004 SELECT AMOUNT Shares sold $ 21,945 $ 14,341 Shares issued in reinvestment of distributions 5,138 3,085 Shares redeemed (24,021) (45,233) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 3,062 $ (27,807) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 2,349 1,542 Shares issued in reinvestment of distributions 578 330 Shares redeemed (2,531) (4,787) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 396 (2,915) - ---------------------------------------------------------------------------------------------------
102
GLOBAL STRATEGIC INCOME FUND ------------------------------------- SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 2005 AUGUST 31, 2004@ CLASS A AMOUNT Shares sold $ 289 $ 838 Shares issued in connection with Fund Reorganization (Note 2) 3,011 Shares issued in reinvestment of distributions 17 26 Shares redeemed (294) (466) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 3,023 $ 398 - ---------------------------------------------------------------------------------------------------------- SHARES Shares sold 31 93 Shares issued in connection with Fund Reorganization (Note 2) 325 Shares issued in reinvestment of distributions 2 3 Shares redeemed (32) (52) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 326 44 - ---------------------------------------------------------------------------------------------------------- CLASS B* AMOUNT Shares sold $ 45 $ -- Shares issued in connection with Fund Reorganization (Note 2) 7,328 Shares issued in reinvestment of distributions 3 -- Shares redeemed (37) (317) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 7,339 $ (317) - ---------------------------------------------------------------------------------------------------------- SHARES Shares sold 4 -- Shares issued in connection with Fund Reorganization (Note 2) 792 Shares issued in reinvestment of distributions --^ -- Shares redeemed (4) (36) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 792 (36) - ----------------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. * From commencement of offering of shares on February 19, 2005. @ For Class B Shares, activity through September 12, 2003. 103
GLOBAL STRATEGIC INCOME FUND (CONTINUED) ---------------------------------------- SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 2005 AUGUST 31, 2004 CLASS C* AMOUNT Shares sold $ --^ $ -- Shares issued in connection with Fund Reorganization (Note 2) 2,925 Shares issued in reinvestment of distributions 2 -- Shares redeemed (13) -- - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 2,914 $ -- - ---------------------------------------------------------------------------------------------------------- SHARES Shares sold --^ -- Shares issued in connection with Fund Reorganization (Note 2) 316 Shares issued in reinvestment of distributions --^ -- Shares redeemed (2) -- - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 314 -- - ---------------------------------------------------------------------------------------------------------- CLASS M* AMOUNT Shares sold $ 2 $ -- Shares issued in connection with Fund Reorganization (Note 2) 6,507 Shares issued in reinvestment of distributions -- -- Shares redeemed -- -- - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 6,509 $ -- - ---------------------------------------------------------------------------------------------------------- SHARES Shares sold 1 -- Shares issued in connection with Fund Reorganization (Note 2) 702 Shares issued in reinvestment of distributions -- -- Shares redeemed -- -- - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 703 -- - ----------------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. * From commencement of offering of shares on February 19, 2005. 104
GLOBAL STRATEGIC INCOME FUND (CONTINUED) ---------------------------------------- SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 2005 AUGUST 31, 2004 INSTITUTIONAL AMOUNT Shares sold $ 1,421 $ 861 Shares issued in reinvestment of distributions 50 263 Shares redeemed (18,275) (70,986) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (16,804) $ (69,862) - ---------------------------------------------------------------------------------------------------------- SHARES Shares sold 154 94 Shares issued in reinvestment of distributions 5 29 Shares redeemed (1,989) (7,786) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (1,830) (7,663) - ---------------------------------------------------------------------------------------------------------- SELECT AMOUNT Shares sold $ 269 $ 271 Shares issued in reinvestment of distributions 44 141 Shares redeemed (271) (1,058) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 42 $ (646) - ---------------------------------------------------------------------------------------------------------- SHARES Shares sold 29 30 Shares issued in reinvestment of distributions 5 15 Shares redeemed (29) (116) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 5 (71) - ----------------------------------------------------------------------------------------------------------
105
SHORT TERM BOND FUND ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 2005 AUGUST 31, 2004 CLASS A AMOUNT Shares sold $ 1,302 $ 1,777 Shares issued in reinvestment of distributions 34 60 Shares redeemed (479) (7,872) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 857 $ (6,035) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 133 180 Shares issued in reinvestment of distributions 3 6 Shares redeemed (49) (800) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 87 (614) - --------------------------------------------------------------------------------------------------- INSTITUTIONAL AMOUNT Shares sold $ 68,286 $ 232,147 Shares issued in reinvestment of distributions 7,638 12,345 Shares redeemed (96,095) (406,830) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (20,171) $ (162,338) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 6,969 23,525 Shares issued in reinvestment of distributions 781 1,252 Shares redeemed (9,810) (41,331) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (2,060) (16,554) - --------------------------------------------------------------------------------------------------- SELECT AMOUNT Shares sold $ 21,511 $ 46,594 Shares issued in reinvestment of distributions 889 1,497 Shares redeemed (15,495) (75,703) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 6,905 $ (27,612) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 2,203 4,723 Shares issued in reinvestment of distributions 91 152 Shares redeemed (1,583) (7,682) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 711 (2,807) - ---------------------------------------------------------------------------------------------------
106
SHORT TERM BOND FUND II ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, 2005 AUGUST 31, 2004 CLASS A AMOUNT Shares sold $ 2,164 $ 45,840 Shares issued in reinvestment of distributions 616 815 Shares redeemed (8,850) (35,304) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (6,070) $ 11,351 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 213 4,499 Shares issued in reinvestment of distributions 61 80 Shares redeemed (873) (3,449) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (599) 1,130 - --------------------------------------------------------------------------------------------------- CLASS M AMOUNT Shares sold $ 7,495 $ 62,729 Shares issued in reinvestment of distributions 2 20 Shares redeemed (146,643) (584,516) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (139,146) $ (521,767) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 739 6,131 Shares issued in reinvestment of distributions --^ 2 Shares redeemed (14,442) (57,237) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (13,703) (51,104) - --------------------------------------------------------------------------------------------------- SELECT AMOUNT Shares sold $ 52,300 $ 354,225 Shares issued in reinvestment of distributions 560 1,103 Shares redeemed (76,182) (203,163) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (23,322) $ 152,165 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 5,141 34,518 Shares issued in reinvestment of distributions 55 108 Shares redeemed (7,493) (19,866) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (2,297) 14,760 - ---------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. 107 JPMORGAN FUNDS FINANCIAL HIGHLIGHTS CLASS A
PER SHARE OPERATING PERFORMANCE: -------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: --------------------------------------- ------------------------------------------ NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES DIVIDENDS VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TOTAL OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS BOND FUND Six Months Ended 2/28/05 $ 10.05 0.17 0.08 0.25 0.20 0.30 0.50 Year Ended 8/31/04 $ 10.03 0.32 0.32 0.64 0.32 0.30 0.62 Year Ended 8/31/03 $ 10.07 0.40 0.04 0.44 0.40 0.08 0.48 11/1/01 Through 8/31/02^^ $ 10.08 0.31 0.05 0.36 0.31 0.06 0.37 9/10/01** Through 10/31/01 $ 9.89 0.06^ 0.20 0.26 0.07 -- 0.07 GLOBAL STRATEGIC INCOME FUND Six Months Ended 2/28/05 $ 9.08 0.18^ 0.15 0.33 0.17 -- 0.17 Year Ended 8/31/04 $ 8.92 0.48^ 0.15 0.63 0.47 -- 0.47 Year Ended 8/31/03 $ 8.64 0.40^ 0.31 0.71 0.43 -- 0.43 11/1/01 Through 8/31/02^^ $ 8.91 0.55 (0.33) 0.22 0.47 0.02 0.49 9/10/01** Through 10/31/01 $ 9.13 0.09^ (0.22) (0.13) 0.09 -- 0.09 SHORT TERM BOND FUND Six Months Ended 2/28/05 $ 9.84 0.14 (0.12) 0.02 0.15 -- 0.15 Year Ended 8/31/04 $ 9.85 0.20 (0.01) 0.19 0.20 -- 0.20 Year Ended 8/31/03 $ 10.03 0.24 (0.03) 0.21 0.25 0.14 0.39 11/1/01 Through 8/31/02^^ $ 10.01 0.27 0.05 0.32 0.26 0.04 0.30 9/10/01** Through 10/31/01 $ 9.87 0.05^ 0.15 0.20 0.06 -- 0.06
** Commencement of offering of class of shares. ^ Calculated based upon average shares outstanding. ^^ The fund changed its fiscal year end from October 31 to August 31. SEE NOTES TO FINANCIAL STATEMENTS. 108
PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (1)(b) BOND FUND Six Months Ended 2/28/05 $ 9.80 2.48% Year Ended 8/31/04 $ 10.05 6.61% Year Ended 8/31/03 $ 10.03 4.32% 11/1/01 Through 8/31/02^^ $ 10.07 3.72% 9/10/01** Through 10/31/01 $ 10.08 2.63% GLOBAL STRATEGIC INCOME FUND Six Months Ended 2/28/05 $ 9.24 3.65% Year Ended 8/31/04 $ 9.08 7.20% Year Ended 8/31/03 $ 8.92 8.33% 11/1/01 Through 8/31/02^^ $ 8.64 2.54% 9/10/01** Through 10/31/01 $ 8.91 (2.30%) SHORT TERM BOND FUND Six Months Ended 2/28/05 $ 9.71 0.16% Year Ended 8/31/04 $ 9.84 1.92% Year Ended 8/31/03 $ 9.85 2.08% 11/1/01 Through 8/31/02^^ $ 10.03 3.18% 9/10/01** Through 10/31/01 $ 10.01 2.01% RATIOS/SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ----------------------------------------------------------------------------------- NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND Six Months Ended 2/28/05 $ 3 0.74% 3.36% 1.90% 2.20% 243% Year Ended 8/31/04 $ 3 0.75% 3.19% 1.88% 2.06% 571% Year Ended 8/31/03 $ 2 0.75% 3.86% 1.59% 3.02% 679% 11/1/01 Through 8/31/02^^ $ 1 0.75% 3.59% 5.64% (1.30%) 572% 9/10/01** Through 10/31/01 $ --+ 0.75% 3.93% 10.75% (6.07%) 423% GLOBAL STRATEGIC INCOME FUND Six Months Ended 2/28/05 $ 4 1.22% 3.79% 2.69% 2.32% 261% Year Ended 8/31/04 $ 1 1.27%(o) 5.31% 4.23% 2.35% 152% Year Ended 8/31/03 $ --+ 1.25% 4.45% 7.26% (1.56%) 248% 11/1/01 Through 8/31/02^^ $ --+ 1.25% 6.20% 35.90%@ (28.45%)@ 178% 9/10/01** Through 10/31/01 $ --+ 1.25% 6.99% 11.01% (2.77%) 107% SHORT TERM BOND FUND Six Months Ended 2/28/05 $ 3 0.75% 2.88% 1.54% 2.09% 56% Year Ended 8/31/04 $ 3 0.75% 2.00% 1.17% 1.58% 261% Year Ended 8/31/03 $ 9 0.75% 2.39% 1.10% 2.04% 386% 11/1/01 Through 8/31/02^^ $ 10 0.75% 3.01% 1.00% 2.76% 215% 9/10/01** Through 10/31/01 $ 2 0.75% 3.62% 10.76% (6.39%) 160%
# Short periods have been annualized. (1) Total return figures do not include the effect of any front-end or deferred sales load. (b) Not annualized for periods less than one year. + Amount rounds to less than one million. (o) Includes interest expense for custody overdraft of 1 basis point. @ Due to the size of net assets and fixed expenses, ratios may appear disproportionate. SEE NOTES TO FINANCIAL STATEMENTS. 109
PER SHARE OPERATING PERFORMANCE: --------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: --------------------------------------- ---------------------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES DIVIDENDS VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS TAX BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL RETURN OF TOTAL OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS CAPITAL DISTRIBUTIONS SHORT TERM BOND FUND II Six Months Ended 2/28/05 $ 10.21 0.14 (0.15) (0.01) 0.13 -- -- 0.13 Year Ended 8/31/04 $ 10.23 0.21^ (0.02) 0.19 0.21 -- --+ 0.21 Year Ended 8/31/03 $ 10.33 0.23^ (0.04) 0.19 0.24 0.05 --+ 0.29 11/1/01 Through 8/31/02^^ $ 10.38 0.25 0.06 0.31 0.25 0.11 -- 0.36 Year Ended 10/31/01 $ 9.89 0.43^ 0.53 0.96 0.47 -- -- 0.47 Year Ended 10/31/00 $ 9.94 0.56 (0.05) 0.51 0.56 -- -- 0.56 Year Ended 10/31/99 $ 10.14 0.46 (0.20) 0.26 0.46 -- -- 0.46
^ Calculated based upon average shares outstanding. + Rounds to less than .005 per share amount. ^^ The fund changed its fiscal year from October 31 to August 31. SEE NOTES TO FINANCIAL STATEMENTS. 110
PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (1)(b) SHORT TERM BOND FUND II Six Months Ended 2/28/05 $ 10.07 (0.06%) Year Ended 8/31/04 $ 10.21 1.85% Year Ended 8/31/03 $ 10.23 1.88% 11/1/01 Through 8/31/02^^ $ 10.33 3.06% Year Ended 10/31/01 $ 10.38 9.95% Year Ended 10/31/00 $ 9.89 5.27% Year Ended 10/31/99 $ 9.94 2.64% RATIOS/SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ----------------------------------------------------------------------------------- NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) SHORT TERM BOND FUND II Six Months Ended 2/28/05 $ 49 0.75% 2.67% 1.07% 2.35% 47% Year Ended 8/31/04 $ 55 0.75% 2.03% 1.10% 1.68% 253% Year Ended 8/31/03 $ 44 0.75% 2.31% 0.96% 2.10% 319% 11/1/01 Through 8/31/02^^ $ 70 0.75% 2.66% 1.00% 2.41% 192% Year Ended 10/31/01 $ 52 0.75% 4.25% 1.15% 3.85% 315% Year Ended 10/31/00 $ 19 0.75% 5.68% 1.37% 5.06% 139% Year Ended 10/31/99 $ 22 0.75% 4.58% 1.37% 3.96% 302%
# Short periods have been annualized. (1) Total return figures do not include the effect of any front-end sales load. (b) Not annualized for periods less than one year. SEE NOTES TO FINANCIAL STATEMENTS. 111 CLASS B
PER SHARE OPERATING PERFORMANCE: -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: -------------------------------------- ---------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES DIVIDENDS VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TOTAL OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS BOND FUND Six Months Ended 2/28/05 $ 9.97 0.13 0.08 0.21 0.14 0.30 0.44 Year Ended 8/31/04 $ 9.95 0.25 0.32 0.57 0.25 0.30 0.55 Year Ended 8/31/03 $ 10.05 0.33 (0.03) 0.30 0.32 0.08 0.40 11/1/01 Through 8/31/02^^ $ 10.08 0.24 0.03 0.27 0.24 0.06 0.30 9/10/01** Through 10/31/01 $ 9.89 0.06^ 0.19 0.25 0.06 -- 0.06 GLOBAL STRATEGIC INCOME FUND 2/19/05** Through 2/28/05 $ 9.26 0.01^ (0.02) (0.01) 0.01 -- 0.01
^^ The fund changed its fiscal year from October 31 to August 31. ** Commencement of offering of class of shares. ^ Calculated based upon average shares outstanding. SEE NOTES TO FINANCIAL STATEMENTS. 112
PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (1)(b) BOND FUND Six Months Ended 2/28/05 $ 9.74 2.09% Year Ended 8/31/04 $ 9.97 5.89% Year Ended 8/31/03 $ 9.95 2.94% 11/1/01 Through 8/31/02^^ $ 10.05 2.83% 9/10/01** Through 10/31/01 $ 10.08 2.53% GLOBAL STRATEGIC INCOME FUND 2/19/05** Through 2/28/05 $ 9.24 (0.13%) RATIOS/SUPPLEMENTAL DATA: ---------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------------------------------- NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND Six Months Ended 2/28/05 $ 2 1.49% 2.65% 2.41% 1.73% 243% Year Ended 8/31/04 $ 2 1.50% 2.48% 2.36% 1.62% 571% Year Ended 8/31/03 $ 2 1.50% 3.19% 2.14% 2.55% 679% 11/1/01 Through 8/31/02^^ $ 1 1.50% 2.80% 6.02% (1.72%) 572% 9/10/01** Through 10/31/01 $ --+ 1.48% 4.07% 11.25% (5.70%) 423% GLOBAL STRATEGIC INCOME FUND 2/19/05** Through 2/28/05 $ 7 1.65% 4.04% 2.11% 3.58% 261%
# Short periods have been annualized. (1) Total return figures do not include the effect of any front-end or deferred sales load. (b) Not annualized for periods less than one year. + Amount rounds to less than one million. SEE NOTES TO FINANCIAL STATEMENTS. 113 CLASS C
PER SHARE OPERATING PERFORMANCE: -------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: -------------------------------------- ---------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES DIVIDENDS VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TOTAL OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS BOND FUND Six Months Ended 2/28/05 $ 10.03 0.13 0.08 0.21 0.14 0.30 0.44 Year Ended 8/31/04 $ 10.01 0.24 0.33 0.57 0.25 0.30 0.55 3/31/03** Through 8/31/03 $ 10.22 0.14 (0.21) (0.07) 0.14 -- 0.14 GLOBAL STRATEGIC INCOME FUND 2/19/05** Through 2/28/05 $ 9.26 0.01^ (0.02) (0.01) 0.01 -- 0.01
** Commencement of offering of class of shares. ^ Calculated based upon average shares outstanding. SEE NOTES TO FINANCIAL STATEMENTS. 114
PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (1)(b) BOND FUND Six Months Ended 2/28/05 $ 9.80 2.09% Year Ended 8/31/04 $ 10.03 5.84% 3/31/03** Through 8/31/03 $ 10.01 (0.69%) GLOBAL STRATEGIC INCOME FUND 2/19/05** Through 2/28/05 $ 9.24 (0.13%) RATIOS/SUPPLEMENTAL DATA: ---------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------------------------------- NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND Six Months Ended 2/28/05 $ --+ 1.49% 2.62% 2.40% 1.71% 243% Year Ended 8/31/04 $ --+ 1.50% 2.45% 2.36% 1.59% 571% 3/31/03** Through 8/31/03 $ --+ 1.50% 3.02% 1.78% 2.74% 679% GLOBAL STRATEGIC INCOME FUND 2/19/05** Through 2/28/05 $ 3 1.65% 4.04% 2.11% 3.58% 261%
# Short periods have been annualized. (b) Not annualized for periods less than one year. + Amount rounds to less than one million. (1) Total return figures do not include the effect of any front-end or deferred sales load. SEE NOTES TO FINANCIAL STATEMENTS. 115 CLASS M
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: -------------------------------------- --------------------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES DIVIDENDS VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS TAX BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL RETURN OF TOTAL OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS CAPITAL DISTRIBUTIONS GLOBAL STRATEGIC INCOME FUND 2/19/05** Through 2/28/05 $ 9.26 0.01^ (0.02) (0.01) 0.01 -- -- 0.01 SHORT TERM BOND FUND II Six Months Ended 2/28/05 $ 10.21 0.12 (0.14) (0.02) 0.12 -- 0.12 Year Ended 8/31/04 $ 10.23 0.18^ (0.02) 0.16 0.18 -- --+ 0.18 Year Ended 8/31/03 $ 10.33 0.21^ (0.04) 0.17 0.22 0.05 --+ 0.27 11/1/01 Through 8/31/02^^ $ 10.37 0.23 0.06 0.29 0.22 0.11 -- 0.33 Year Ended 10/31/01 $ 9.89 0.35^ 0.58 0.93 0.45 -- -- 0.45 Year Ended 10/31/00 $ 9.94 0.54 (0.05) 0.49 0.54 -- -- 0.54 7/1/99** Through 10/31/99 $ 9.98 0.16 (0.04) 0.12 0.16 -- -- 0.16
** Commencement of offering of class of shares. ^ Calculated based upon average shares outstanding. + Rounds to less than .005 per share amount. ^^ The fund changed its fiscal year from October 31 to August 31. SEE NOTES TO FINANCIAL STATEMENTS. 116
PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (1)(b) GLOBAL STRATEGIC INCOME FUND 2/19/05** Through 2/28/05 $ 9.24 (0.13%) SHORT TERM BOND FUND II Six Months Ended 2/28/05 $ 10.07 (0.19%) Year Ended 8/31/04 $ 10.21 1.58% Year Ended 8/31/03 $ 10.23 1.64% 11/1/01 Through 8/31/02^^ $ 10.33 2.92% Year Ended 10/31/01 $ 10.37 9.63% Year Ended 10/31/00 $ 9.89 5.04% 7/1/99** Through 10/31/99 $ 9.94 1.26% RATIOS/SUPPLEMENTAL DATA: ---------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------------------------------ NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) GLOBAL STRATEGIC INCOME FUND 2/19/05** Through 2/28/05 $ 6 1.45% 4.23% 1.91% 3.78% 261% SHORT TERM BOND FUND II Six Months Ended 2/28/05 $ 497 0.99% 2.40% 1.03% 2.36% 47% Year Ended 8/31/04 $ 643 1.00% 1.75% 1.04% 1.71% 253% Year Ended 8/31/03 $ 1,168 1.00% 2.07% 1.04% 2.03% 319% 11/1/01 Through 8/31/02^^ $ 1,127 1.00% 2.41% 1.03% 2.38% 192% Year Ended 10/31/01 $ 689 1.00% 3.45% 1.11% 3.34% 315% Year Ended 10/31/00 $ 13 0.99% 5.51% 1.73% 4.77% 139% 7/1/99** Through 10/31/99 $ 3 0.97% 4.72% 1.41% 4.28% 302%
# Short periods have been annualized. (1) Total return figures do not include the effect of any front-end or deferred sales load. (b) Not annualized for periods less than one year. SEE NOTES TO FINANCIAL STATEMENTS. 117 INSTITUTIONAL
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: ------------------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS BOND FUND Six Months Ended 2/28/05 $ 9.96 0.18 0.08 0.26 Year Ended 8/31/04 $ 9.94 0.35 0.32 0.67 Year Ended 8/31/03 $ 10.04 0.42 (0.02) 0.40 11/1/01 Through 8/31/02^^ $ 10.08 0.34 0.02 0.36 Year Ended 10/31/01 $ 9.43 0.58^ 0.65 1.23 Year Ended 10/31/00 $ 9.41 0.60 0.02 0.62 Year Ended 10/31/99 $ 10.10 0.57 (0.57) -- ENHANCED INCOME FUND Six Months Ended 2/28/05 $ 9.84 0.11 (0.01) 0.10 Year Ended 8/31/04 $ 9.86 0.14 (0.02) 0.12 Year Ended 8/31/03 $ 9.98 0.23 (0.12) 0.11 11/30/01* Through 8/31/02 $ 10.00 0.18 (0.02) 0.16 GLOBAL STRATEGIC INCOME FUND Six Months Ended 2/28/05 $ 9.08 0.20^ 0.16 0.36 Year Ended 8/31/04 $ 8.92 0.51^ 0.17 0.68 Year Ended 8/31/03 $ 8.65 0.48^ 0.27 0.75 11/1/01 Through 8/31/02^^ $ 8.95 0.47 (0.30) 0.17 Year Ended 10/31/01 $ 9.29 0.69^ (0.16) 0.53 Year Ended 10/31/00 $ 9.35 0.88 (0.25) 0.63 Year Ended 10/31/99 $ 9.72 0.62 (0.37) 0.25 PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------------ LESS DISTRIBUTIONS: ------------------------------------------------ DIVIDENDS FROM NET DISTRIBUTIONS TAX INVESTMENT FROM CAPITAL RETURN OF TOTAL INCOME GAINS CAPITAL DISTRIBUTIONS BOND FUND Six Months Ended 2/28/05 0.21 0.30 -- 0.51 Year Ended 8/31/04 0.35 0.30 -- 0.65 Year Ended 8/31/03 0.42 0.08 -- 0.50 11/1/01 Through 8/31/02^^ 0.34 0.06 -- 0.40 Year Ended 10/31/01 0.58 -- -- 0.58 Year Ended 10/31/00 0.60 --(a) -- 0.60 Year Ended 10/31/99 0.57 0.12 -- 0.69 ENHANCED INCOME FUND Six Months Ended 2/28/05 0.11 -- -- 0.11 Year Ended 8/31/04 0.14 -- -- 0.14 Year Ended 8/31/03 0.23 -- -- 0.23 11/30/01* Through 8/31/02 0.18 -- -- 0.18 GLOBAL STRATEGIC INCOME FUND Six Months Ended 2/28/05 0.20 -- -- 0.20 Year Ended 8/31/04 0.52 -- -- 0.52 Year Ended 8/31/03 0.48 -- -- 0.48 11/1/01 Through 8/31/02^^ 0.45 -- 0.02 0.47 Year Ended 10/31/01 0.87 -- -- 0.87 Year Ended 10/31/00 0.69 -- -- 0.69 Year Ended 10/31/99 0.62 -- -- 0.62
^^ The fund changed its fiscal year end from October 31 to August 31. ^ Calculated based upon average shares outstanding. (a) Rounds to less than .005 per share amount. * Commencement of operations. SEE NOTES TO FINANCIAL STATEMENTS. 118
PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (b) BOND FUND Six Months Ended 2/28/05 $ 9.71 2.71% Year Ended 8/31/04 $ 9.96 6.96% Year Ended 8/31/03 $ 9.94 3.99% 11/1/01 Through 8/31/02^^ $ 10.04 3.71% Year Ended 10/31/01 $ 10.08 13.46% Year Ended 10/31/00 $ 9.43 6.83% Year Ended 10/31/99 $ 9.41 0.03% ENHANCED INCOME FUND Six Months Ended 2/28/05 $ 9.83 1.03% Year Ended 8/31/04 $ 9.84 1.28% Year Ended 8/31/03 $ 9.86 1.14% 11/30/01* Through 8/31/02 $ 9.98 1.58% GLOBAL STRATEGIC INCOME FUND Six Months Ended 2/28/05 $ 9.24 3.94% Year Ended 8/31/04 $ 9.08 7.85% Year Ended 8/31/03 $ 8.92 8.86% 11/1/01 Through 8/31/02^^ $ 8.65 1.92% Year Ended 10/31/01 $ 8.95 5.86% Year Ended 10/31/00 $ 9.29 6.93% Year Ended 10/31/99 $ 9.35 2.62% RATIOS/SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS:# --------------------------------------------------------------------- NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND Six Months Ended 2/28/05 $ 284 0.49% 3.65% 0.61% 3.53% 243% Year Ended 8/31/04 $ 318 0.49% 3.51% 0.62% 3.38% 571% Year Ended 8/31/03 $ 478 0.49% 4.10% 0.60% 3.99% 679% 11/1/01 Through 8/31/02^^ $ 747 0.49% 4.14% 0.58% 4.05% 572% Year Ended 10/31/01 $ 1,016 0.49% 5.98% 0.51% 5.96% 423%(x) Year Ended 10/31/00 $ 907 0.49% 6.37% 0.49% 6.37% 531%(x) Year Ended 10/31/99 $ 1,041 0.50% 5.92% 0.51% 5.91% 465%(x) ENHANCED INCOME FUND Six Months Ended 2/28/05 $ 208 0.20% 2.23% 0.57% 1.86% 45% Year Ended 8/31/04 $ 294 0.20% 1.47% 0.56% 1.12% 156% Year Ended 8/31/03 $ 354 0.20% 2.33% 0.56% 1.97% 328% 11/30/01* Through 8/31/02 $ 300 0.20% 2.40% 0.68% 1.92% 120% GLOBAL STRATEGIC INCOME FUND Six Months Ended 2/28/05 $ 23 0.65% 4.38% 1.38% 3.65% 261% Year Ended 8/31/04 $ 40 0.66%(o) 5.63% 1.22% 5.07% 152% Year Ended 8/31/03 $ 108 0.65% 5.42% 0.97% 5.10% 248% 11/1/01 Through 8/31/02^^ $ 135 0.65% 6.44% 0.98% 6.11% 178% Year Ended 10/31/01 $ 143 0.65% 7.50% 0.80% 7.35% 107%(y) Year Ended 10/31/00 $ 163 0.65% 7.36% 0.80% 7.21% 266%(y) Year Ended 10/31/99 $ 183 0.65% 6.70% 0.78% 5.29% 318%(y)
# Short periods have been annualized. (b) Not annualized for periods less than one year. (x) Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S. Fixed Income Portfolio, in which the Fund invested all of its investable assets. (y) Percentages prior to 9/10/01 reflect the portfolio turnover of The Global Strategic Income Portfolio, in which the Fund invested all of its investable assets. (o) Includes interest expense for custody overdraft of 1 basis point. SEE NOTES TO FINANCIAL STATEMENTS. 119
PER SHARE OPERATING PERFORMANCE: --------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: ------------------------------------------ ------------------------------------------ NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES DIVIDENDS VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TOTAL OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS SHORT TERM BOND FUND Six Months Ended 2/28/05 $ 9.85 0.16 (0.12) 0.04 0.18 -- 0.18 Year Ended 8/31/04 $ 9.86 0.25 (0.02) 0.23 0.24 -- 0.24 Year Ended 8/31/03 $ 10.05 0.28 (0.04) 0.24 0.29 0.14 0.43 11/1/01 Through 8/31/02^^ $ 10.03 0.29 0.06 0.35 0.29 0.04 0.33 Year Ended 10/31/01 $ 9.58 0.54^ 0.46 1.00 0.55 -- 0.55 Year Ended 10/31/00 $ 9.67 0.60 (0.08) 0.52 0.61 -- 0.61 Year Ended 10/31/99 $ 9.96 0.58 (0.29) 0.29 0.54 0.04 0.58
^^ The fund changed its fiscal year end from October 31 to August 31. ^ Calculated based upon average shares outstanding. SEE NOTES TO FINANCIAL STATEMENTS. 120
PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (b) SHORT TERM BOND FUND Six Months Ended 2/28/05 $ 9.71 0.39% Year Ended 8/31/04 $ 9.85 2.38% Year Ended 8/31/03 $ 9.86 2.44% 11/1/01 Through 8/31/02^^ $ 10.05 3.55% Year Ended 10/31/01 $ 10.03 10.70% Year Ended 10/31/00 $ 9.58 5.49% Year Ended 10/31/99 $ 9.67 3.03% RATIOS/SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS: # --------------------------------------------------------------------- NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) SHORT TERM BOND FUND Six Months Ended 2/28/05 $ 613 0.30% 3.30% 0.54% 3.06% 56% Year Ended 8/31/04 $ 642 0.30% 2.49% 0.55% 2.24% 261% Year Ended 8/31/03 $ 806 0.30% 2.85% 0.55% 2.60% 386% 11/1/01 Through 8/31/02^^ $ 618 0.30% 3.53% 0.54% 3.29% 215% Year Ended 10/31/01 $ 697 0.30% 5.52% 0.48% 5.34% 160%(z) Year Ended 10/31/00 $ 415 0.30% 6.30% 0.47% 6.13% 271%(z) Year Ended 10/31/99 $ 354 0.29% 5.51% 0.51% 5.29% 398%(z)
# Short periods have been annualized. (b) Not annualized for periods less than one year. (z) Percentages prior to 9/10/01 reflect the portfolio turnover of The Short Term Bond Portfolio, in which the Fund invested all of its investable assets. SEE NOTES TO FINANCIAL STATEMENTS. 121 SELECT
PER SHARE OPERATING PERFORMANCE: ---------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: ---------------------------------------- NET GAINS (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS BOND FUND@ Six Months Ended 2/28/05 $ 9.97 0.17 0.07 0.24 Year Ended 8/31/04 $ 9.94 0.33 0.33 0.66 Year Ended 8/31/03 $ 10.04 0.40 (0.01) 0.39 11/1/01 Through 8/31/02^^ $ 10.08 0.32 0.02 0.34 Year Ended 10/31/01 $ 9.43 0.52^ 0.70 1.22 Year Ended 10/31/00 $ 9.41 0.58 0.02 0.60 Year Ended 10/31/99 $ 10.09 0.55 (0.57) (0.02) EMERGING MARKETS DEBT FUND Six Months Ended 2/28/05 $ 9.58 0.31 0.71 1.02 Year Ended 8/31/04 $ 9.02 0.67 0.60 1.27 Year Ended 8/31/03 $ 7.53 0.68 1.53 2.21 8/1/02 Through 8/31/02^^^ $ 7.05 0.05 0.49 0.54 Year Ended 7/31/02 $ 7.82 0.77 (0.77) -- Year Ended 7/31/01 $ 8.77 0.88 (0.87) 0.01 Year Ended 7/31/00 $ 7.29 0.95 1.42 2.37 GLOBAL STRATEGIC INCOME FUND@ Six Months Ended 2/28/05 $ 9.08 0.18^ 0.16 0.34 Year Ended 8/31/04 $ 8.92 0.49^ 0.16 0.65 Year Ended 8/31/03 $ 8.65 0.45^ 0.27 0.72 11/1/01 Through 8/31/02^^ $ 8.95 0.45 (0.31) 0.14 Year Ended 10/31/01 $ 9.42 0.67^ (0.38) 0.29 Year Ended 10/31/00 $ 9.47 0.87 (0.26) 0.61 Year Ended 10/31/99 $ 9.84 0.60 (0.38) 0.22 PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------ LESS DISTRIBUTIONS: ------------------------------------------------------ DIVIDENDS FROM NET DISTRIBUTIONS TAX INVESTMENT FROM CAPITAL RETURN OF TOTAL INCOME GAINS CAPITAL DISTRIBUTIONS BOND FUND@ Six Months Ended 2/28/05 0.20 0.30 -- 0.50 Year Ended 8/31/04 0.33 0.30 -- 0.63 Year Ended 8/31/03 0.41 0.08 -- 0.49 11/1/01 Through 8/31/02^^ 0.32 0.06 -- 0.38 Year Ended 10/31/01 0.57 -- -- 0.57 Year Ended 10/31/00 0.58 -- -- 0.58 Year Ended 10/31/99 0.56 0.10 -- 0.66 EMERGING MARKETS DEBT FUND Six Months Ended 2/28/05 0.34 1.31 -- 1.65 Year Ended 8/31/04 0.71 -- -- 0.71 Year Ended 8/31/03 0.72 -- -- 0.72 8/1/02 Through 8/31/02^^^ 0.06 -- -- 0.06 Year Ended 7/31/02 0.77 -- -- 0.77 Year Ended 7/31/01 0.96 -- -- 0.96 Year Ended 7/31/00 0.89 -- -- 0.89 GLOBAL STRATEGIC INCOME FUND@ Six Months Ended 2/28/05 0.18 -- -- 0.18 Year Ended 8/31/04 0.49 -- -- 0.49 Year Ended 8/31/03 0.45 -- -- 0.45 11/1/01 Through 8/31/02^^ 0.42 -- 0.02 0.44 Year Ended 10/31/01 0.76 -- -- 0.76 Year Ended 10/31/00 0.66 -- -- 0.66 Year Ended 10/31/99 0.59 -- -- 0.59
@ Prior to the open of business on September 10, 2001, the class underwent a split of shares. Prior periods have been restated to reflect the split. ^^ The fund changed its fiscal year end from October 31 to August 31. ^^^ The fund changed its fiscal year end from July 31 to August 31. ^ Calculated based upon average shares outstanding. SEE NOTES TO FINANCIAL STATEMENTS. 122
PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (b) BOND FUND@ Six Months Ended 2/28/05 $ 9.71 2.47% Year Ended 8/31/04 $ 9.97 6.88% Year Ended 8/31/03 $ 9.94 3.82% 11/1/01 Through 8/31/02^^ $ 10.04 3.57% Year Ended 10/31/01 $ 10.08 13.32% Year Ended 10/31/00 $ 9.43 6.61% Year Ended 10/31/99 $ 9.41 (0.23%) EMERGING MARKETS DEBT FUND Six Months Ended 2/28/05 $ 8.95 11.32% Year Ended 8/31/04 $ 9.58 14.56% Year Ended 8/31/03 $ 9.02 30.49% 8/1/02 Through 8/31/02^^^ $ 7.53 7.69% Year Ended 7/31/02 $ 7.05 (0.67%) Year Ended 7/31/01 $ 7.82 (0.17%) Year Ended 7/31/00 $ 8.77 34.12% GLOBAL STRATEGIC INCOME FUND@ Six Months Ended 2/28/05 $ 9.24 3.76% Year Ended 8/31/04 $ 9.08 7.48% Year Ended 8/31/03 $ 8.92 8.48% 11/1/01 Through 8/31/02^^ $ 8.65 1.61% Year Ended 10/31/01 $ 8.95 5.46% Year Ended 10/31/00 $ 9.42 6.57% Year Ended 10/31/99 $ 9.47 2.26% RATIOS/SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS: # ---------------------------------------------------------------------- NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND@ Six Months Ended 2/28/05 $ 188 0.67% 3.48% 0.77% 3.38% 243% Year Ended 8/31/04 $ 189 0.66% 3.33% 0.78% 3.21% 571% Year Ended 8/31/03 $ 308 0.66% 3.97% 0.76% 3.87% 679% 11/1/01 Through 8/31/02^^ $ 312 0.66% 3.95% 0.74% 3.87% 572% Year Ended 10/31/01 $ 315 0.69% 5.77% 0.70% 5.76% 423%(x) Year Ended 10/31/00 $ 240 0.69% 6.19% 0.69% 6.19% 531%(x) Year Ended 10/31/99 $ 235 0.69% 5.72% 0.69% 5.72% 465%(x) EMERGING MARKETS DEBT FUND Six Months Ended 2/28/05 $ 37 1.25% 6.71% 1.70% 6.26% 182% Year Ended 8/31/04 $ 36 1.26%(o) 7.01% 1.65% 6.62% 166% Year Ended 8/31/03 $ 60 1.25% 8.11% 1.52% 7.84% 157% 8/1/02 Through 8/31/02^^^ $ 41 1.25% 9.86% 1.30% 9.81% 12% Year Ended 7/31/02 $ 35 1.25% 9.59% 1.54% 9.30% 110%(v) Year Ended 7/31/01 $ 35 1.25% 11.20% 1.92% 10.53% 141%(v) Year Ended 7/31/00 $ 20 1.25% 11.01% 1.95% 10.31% 295%(v) GLOBAL STRATEGIC INCOME FUND@ Six Months Ended 2/28/05 $ 2 0.99% 4.00% 2.02% 2.97% 261% Year Ended 8/31/04 $ 2 1.01%(o) 5.44% 1.95% 4.50% 152% Year Ended 8/31/03 $ 3 1.00% 5.10% 1.48% 4.62% 248% 11/1/01 Through 8/31/02^^ $ 5 1.00% 6.08% 1.48% 5.60% 178% Year Ended 10/31/01 $ 5 1.00% 7.32% 2.63% 5.69% 107%(y) Year Ended 10/31/00 $ 7 1.00% 7.05% 2.50% 5.55% 266%(y) Year Ended 10/31/99 $ 9 1.00% 6.35% 1.54% 5.81% 318%(y)
# Short periods have been annualized. (b) Not annualized for periods less than one year. (x) Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S. Fixed Income Portfolio, in which the Fund invested all of its investable assets. (v) Percentages prior to 9/10/01 reflect the portfolio turnover of Emerging Markets Debt Portfolio, in which the fund invested all of its investable assets. (y) Percentages prior to 9/10/01 reflect the portfolio turnover of The Global Strategic Income Portfolio, in which the Fund invested all of its investable assets. (o) Includes interest expense for custody overdraft of 1 basis point. SEE NOTES TO FINANCIAL STATEMENTS. 123
PER SHARE OPERATING PERFORMANCE: --------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: ---------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS SHORT TERM BOND FUND@ Six Months Ended 2/28/05 $ 9.84 0.15 (0.12) 0.03 Year Ended 8/31/04 $ 9.86 0.22 (0.02) 0.20 Year Ended 8/31/03 $ 10.04 0.26 (0.03) 0.23 11/1/01 Through 8/31/02^^ $ 10.03 0.28 0.04 0.32 Year Ended 10/31/01 $ 9.61 0.51^ 0.46 0.97 Year Ended 10/31/00 $ 9.70 0.58 (0.09) 0.49 Year Ended 10/31/99 $ 10.00 0.57 (0.31) 0.26 SHORT TERM BOND FUND II Six Months Ended 2/28/05 $ 10.22 0.15 (0.13) 0.02 Year Ended 8/31/04 $ 10.25 0.23^ (0.03) 0.20 Year Ended 8/31/03 $ 10.35 0.27^ (0.05) 0.22 11/1/01 Through 8/31/02^^ $ 10.40 0.26 0.07 0.33 Year Ended 10/31/01 $ 9.90 0.42^ 0.57 0.99 Year Ended 10/31/00 $ 9.95 0.59 (0.05) 0.54 Year Ended 10/31/99 $ 10.15 0.49 (0.20) 0.29 PER SHARE OPERATING PERFORMANCE: --------------------------------------------------- LESS DISTRIBUTIONS: --------------------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS TAX INVESTMENT FROM CAPITAL RETURN OF TOTAL INCOME GAINS CAPITAL DISTRIBUTIONS SHORT TERM BOND FUND@ Six Months Ended 2/28/05 0.16 -- -- 0.16 Year Ended 8/31/04 0.22 -- -- 0.22 Year Ended 8/31/03 0.27 0.14 -- 0.41 11/1/01 Through 8/31/02^^ 0.27 0.04 -- 0.31 Year Ended 10/31/01 0.55 -- -- 0.55 Year Ended 10/31/00 0.58 -- -- 0.58 Year Ended 10/31/99 0.51 0.05 -- 0.56 SHORT TERM BOND FUND II Six Months Ended 2/28/05 0.15 -- -- 0.15 Year Ended 8/31/04 0.23 -- --+ 0.23 Year Ended 8/31/03 0.27 0.05 --+ 0.32 11/1/01 Through 8/31/02^^ 0.27 0.11 -- 0.38 Year Ended 10/31/01 0.49 -- -- 0.49 Year Ended 10/31/00 0.59 -- -- 0.59 Year Ended 10/31/99 0.49 -- -- 0.49
@ Prior to the open of business on September 10, 2001, the class underwent a split of shares. Prior periods have been restated to reflect the split. ^^ The fund changed its fiscal year end from October 31 to August 31. ^ Calculated based upon average shares outstanding. + Rounds to less than .005 per share amount. SEE NOTES TO FINANCIAL STATEMENTS. 124
PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (b) SHORT TERM BOND FUND@ Six Months Ended 2/28/05 $ 9.71 0.28% Year Ended 8/31/04 $ 9.84 1.99% Year Ended 8/31/03 $ 9.86 2.28% 11/1/01 Through 8/31/02^^ $ 10.04 3.21% Year Ended 10/31/01 $ 10.03 10.39% Year Ended 10/31/00 $ 9.61 5.19% Year Ended 10/31/99 $ 9.70 2.70% SHORT TERM BOND FUND II Six Months Ended 2/28/05 $ 10.09 0.17% Year Ended 8/31/04 $ 10.22 2.01% Year Ended 8/31/03 $ 10.25 2.15% 11/1/01 Through 8/31/02^^ $ 10.35 3.30% Year Ended 10/31/01 $ 10.40 10.29% Year Ended 10/31/00 $ 9.90 5.56% Year Ended 10/31/99 $ 9.95 2.97% RATIOS/SUPPLEMENTAL DATA: -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------------------------------- NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) SHORT TERM BOND FUND@ Six Months Ended 2/28/05 $ 100 0.58% 3.06% 0.73% 2.91% 56% Year Ended 8/31/04 $ 94 0.58% 2.22% 0.73% 2.07% 261% Year Ended 8/31/03 $ 122 0.56% 2.59% 0.71% 2.44% 386% 11/1/01 Through 8/31/02^^ $ 122 0.57% 3.22% 0.72% 3.07% 215% Year Ended 10/31/01 $ 67 0.60% 5.22% 0.82% 5.00% 160%(w) Year Ended 10/31/00 $ 38 0.60% 6.00% 0.82% 5.78% 271%(w) Year Ended 10/31/99 $ 39 0.57% 5.24% 0.80% 5.01% 398%(w) SHORT TERM BOND FUND II Six Months Ended 2/28/05 $ 463 0.50% 2.92% 0.69% 2.73% 47% Year Ended 8/31/04 $ 492 0.50% 2.26% 0.70% 2.06% 253% Year Ended 8/31/03 $ 342 0.50% 2.58% 0.70% 2.38% 319% 11/1/01 Through 8/31/02^^ $ 144 0.50% 2.91% 0.70% 2.71% 192% Year Ended 10/31/01 $ 144 0.50% 4.15% 0.77% 3.88% 315% Year Ended 10/31/00 $ 21 0.45% 5.99% 1.02% 5.42% 139% Year Ended 10/31/99 $ 28 0.42% 4.89% 1.02% 4.29% 302%
# Short periods have been annualized. (b) Not annualized for periods less than one year. (w) Percentages prior to 9/10/01 reflect the portfolio turnover of The Short Term Bond Portfolio, in which the Fund invested all of its investable assets. SEE NOTES TO FINANCIAL STATEMENTS. 125 ULTRA@
PER SHARE OPERATING PERFORMANCE: --------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: ---------------------------------------- ---------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES DIVIDENDS VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TOTAL OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS BOND FUND Six Months Ended 2/28/05 $ 9.97 0.18 0.08 0.26 0.22 0.30 0.52 Year Ended 8/31/04 $ 9.95 0.36 0.32 0.68 0.36 0.30 0.66 Year Ended 8/31/03 $ 10.05 0.43 (0.02) 0.41 0.43 0.08 0.51 11/1/01 Through 8/31/02^^ $ 10.09 0.34 0.02 0.36 0.34 0.06 0.40 Year Ended 10/31/01 $ 9.47 0.54^ 0.72 1.26 0.62 0.02 0.64 Year Ended 10/31/00 $ 9.46 0.64 (0.02) 0.62 0.61 -- 0.61 Year Ended 10/31/99 $ 10.02 0.60 (0.57) 0.03 0.59 -- 0.59
@ Prior to the open of business on September 10, 2001, the class underwent a split of shares. Prior periods have been restated to reflect the split. ^^ The fund changed its fiscal year from October 31 to August 31. ^ Calculated based upon average shares outstanding. SEE NOTES TO FINANCIAL STATEMENTS. 126
PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (b) BOND FUND Six Months Ended 2/28/05 $ 9.71 2.67% Year Ended 8/31/04 $ 9.97 7.05% Year Ended 8/31/03 $ 9.95 4.08% 11/1/01 Through 8/31/02^^ $ 10.05 3.80% Year Ended 10/31/01 $ 10.09 13.63% Year Ended 10/31/00 $ 9.47 6.92% Year Ended 10/31/99 $ 9.46 0.28% RATIOS/SUPPLEMENTAL DATA: -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------------------------------- NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND Six Months Ended 2/28/05 $ 358 0.40% 3.74% 0.55% 3.59% 243% Year Ended 8/31/04 $ 381 0.40% 3.59% 0.56% 3.43% 571% Year Ended 8/31/03 $ 444 0.40% 4.19% 0.55% 4.04% 679% 11/1/01 Through 8/31/02^^ $ 609 0.40% 4.20% 0.53% 4.07% 572% Year Ended 10/31/01 $ 598 0.37% 6.08% 0.47% 5.98% 423%(x) Year Ended 10/31/00 $ 466 0.35% 6.49% 0.42% 6.42% 531%(x) Year Ended 10/31/99 $ 299 0.36% 6.08% 0.49% 5.95% 465%(x)
# Short periods have been annualized. (b) Not annualized for periods less than one year. (x) Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S. Fixed Income Portfolio, in which the Fund invested all of its investable assets. SEE NOTES TO FINANCIAL STATEMENTS. 127 JPMORGAN FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustees and Shareholders of J.P. Morgan Mutual Fund Group and JPMorgan Trust I: In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of JPMorgan Short Term Bond Fund II (a separate series of J.P. Morgan Mutual Fund Group), JPMorgan Bond Fund, JPMorgan Enhanced Income Fund, JPMorgan Emerging Markets Debt Fund (formerly JPMorgan Fleming Emerging Markets Debt Fund), JPMorgan Global Strategic Income Fund and JPMorgan Short Term Bond Fund (separate series of JPMorgan Trust I) (hereafter collectively referred to as the "Funds") at February 28, 2005, and the results of each of their operations, the changes in each of their net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York April 25, 2005 128 SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED) A Special Meeting of Shareholders of J.P. Morgan Funds ("JPMF") was held on January 20, 2005, and adjourned and reconvened on February 3, 2005, at 522 Fifth Avenue, New York, New York 10036 for purposes of asking shareholders to consider the following proposals: To elect thirteen (13) Trustees for each JPMorgan Fund. A majority of shareholders of the JPMF approved the election of each Trustee by the following votes:
AFFIRMATIVE NEGATIVE William J. Armstrong 23,945,137 946,540 Roland R. Eppley, Jr. 23,943,509 948,169 John F. Finn 23,946,044 945,633 Dr. Matthew Goldstein 23,983,122 908,556 Robert J. Higgins 23,942,018 949,660 Peter C. Marshall 23,946,044 945,633 Marilyn McCoy 23,983,749 907,928 William G. Morton, Jr. 23,940,389 951,288 Robert A. Oden, Jr. 23,941,453 950,224 Fergus Reid, III 23,940,546 951,131 Frederick W. Ruebeck 23,984,028 907,649 James J. Schonbachler 23,983,122 908,556 Leonard M. Spalding 23,943,509 948,169
To approve proposed Agreement and Plan of Reorganization (each, a "Reorganization Agreement") pursuant to which the Fund would be reorganized as a corresponding series of J.P. Morgan Mutual Fund Series. The following Fund approved the Agreement and Plan of Reorganization by the following votes:
BROKER FOR AGAINST ABSTAIN NON-VOTES JPMorgan Emerging Markets Debt Fund 17,271,301 136,300 693,417 3,205,849
129 A Special Meeting of Shareholders of J.P. Morgan Institutional Funds ("JPMIF") was held on January 20, 2005, and adjourned and reconvened on February 3, 2005, at 522 Fifth Avenue, New York, New York 10036 for purposes of asking shareholders to consider the following proposals: To elect thirteen (13) Trustees for each JPMorgan Fund. A majority of shareholders of the JPMIF approved the election of each Trustee by the following votes:
AFFIRMATIVE NEGATIVE William J. Armstrong 2,570,614,090 22,720,763 Roland R. Eppley, Jr. 2,570,399,817 22,935,037 John F. Finn 2,569,881,278 23,453,575 Dr. Matthew Goldstein 2,570,332,886 23,001,967 Robert J. Higgins 2,569,489,951 23,844,902 Peter C. Marshall 2,569,718,781 23,616,072 Marilyn McCoy 2,569,796,782 23,538,071 William G. Morton, Jr. 2,569,572,614 23,762,240 Robert A. Oden, Jr. 2,569,148,888 24,185,965 Fergus Reid, III 2,570,290,303 23,044,550 Frederick W. Ruebeck 2,569,687,035 23,647,818 James J. Schonbachler 2,570,727,808 22,607,045 Leonard M. Spalding 2,570,279,217 23,055,636
To approve proposed Agreement and Plan of Reorganization (each, a "Reorganization Agreement") pursuant to which each of the Funds would be reorganized as a corresponding series of J.P. Morgan Mutual Fund Series. The following Funds approved the Agreement and Plan of Reorganization by the following votes:
BROKER FOR AGAINST ABSTAIN NON-VOTES JPMorgan Bond Fund 519,182,831 875,750 265,483 8,673,201 JPMorgan Global Strategic Income Fund 28,454,263 20,142 10,561 1,064,906 JPMorgan Short Term Bond Fund 449,627,214 549,723 39,341 15,332,708
130 A Special Meeting of Shareholders of J.P. Morgan Mutual Fund Group ("JPMMFG") was held on January 20, 2005, and adjourned and reconvened on February 3, 2005, at 522 Fifth Avenue, New York, New York 10036 for purposes of asking shareholders to consider the following proposals: To elect thirteen (13) Trustees for each JPMorgan Fund. A majority of shareholders of the JPMMFG approved the election of each Trustee by the following votes:
AFFIRMATIVE NEGATIVE ABSTAIN William J. Armstrong 128,297,849 3,531,682 261,556 Roland R. Eppley, Jr. 128,420,274 3,409,257 261,556 John F. Finn 128,500,853 3,328,678 261,556 Dr. Matthew Goldstein 128,448,980 3,380,551 261,556 Robert J. Higgins 128,521,979 3,307,551 261,556 Peter C. Marshall 128,497,115 3,331,416 261,556 Marilyn McCoy 128,478,689 3,350,842 261,556 William G. Morton, Jr. 128,470,511 3,359,020 261,556 Robert A. Oden, Jr. 128,476,705 3,352,826 261,556 Fergus Reid, III 128,378,739 3,450,792 261,556 Frederick W. Ruebeck 128,426,489 3,403,042 261,556 James J. Schonbachler 128,537,477 3,292,054 261,556 Leonard M. Spalding 128,197,032 3,632,498 261,556
To approve proposed Agreement and Plan of Reorganization (each, a "Reorganization Agreement") pursuant to which the Fund would be reorganized as a corresponding series of J.P. Morgan Mutual Fund Series. The necessary quorum was not met and, as a result, a majority of the shareholders of the Fund did not approve the Agreement and Plan of Reorganization. The following votes were represented:
BROKER FOR AGAINST ABSTAIN NON-VOTES JPMorgan Short Term Bond Fund II 44,881,345 39,939 155,878 3,391,120
131 To approve the amendment of certain fundamental investment restrictions on borrowing in order to make them simpler, more flexible and consistent with the borrowing restrictions for the other JPMorgan Funds. The necessary quorum was not met and, as a result, a majority of the shareholders of the Fund did not approve the Agreement and Plan of Reorganization. The following votes were represented:
BROKER FOR AGAINST ABSTAIN NON-VOTES JPMorgan Short Term Bond Fund II 44,864,382 41,811 170,968 3,391,120
A Special Meeting of Shareholders of J.P. Morgan Series Trust ("JPMST") was held on January 20, 2005, and adjourned and reconvened on February 3, 2005, at 522 Fifth Avenue, New York, New York 10036 for purposes of asking shareholders to consider the following proposals: To elect thirteen (13) Trustees for each JPMorgan Fund. A majority of shareholders of the JPMST approved the election of each Trustee by the following votes:
AFFIRMATIVE NEGATIVE William J. Armstrong 1,992,936,052 8,575,717 Roland R. Eppley, Jr. 1,993,051,772 8,459,997 John F. Finn 1,993,318,545 8,193,223 Dr. Matthew Goldstein 1,993,320,045 8,191,724 Robert J. Higgins 1,993,309,565 8,202,204 Peter C. Marshall 1,993,308,029 8,203,740 Marilyn McCoy 1,993,308,029 8,203,740 William G. Morton, Jr. 1,993,305,371 8,206,397 Robert A. Oden, Jr. 1,993,298,511 8,213,258 Fergus Reid, III 1,992,861,420 8,650,349 Frederick W. Ruebeck 1,993,251,990 8,259,779 James J. Schonbachler 1,993,126,404 8,385,365 Leonard M. Spalding 1,993,173,822 8,337,947
132 To approve proposed Agreement and Plan of Reorganization (each, a "Reorganization Agreement") pursuant to which each of the JPMorgan Funds would be reorganized as a corresponding series of J.P. Morgan Mutual Fund Series. The following Fund approved the Agreement and Plan of Reorganization by the following votes:
BROKER FOR AGAINST ABSTAIN NON-VOTES JPMorgan Enhanced Income Fund 187,049,628 117,369 1,464,793 --
133 Hypothetical $1,000 Investment at Beginning of Period February 28, 2005 (Unaudited) As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees: and (2) ongoing costs, including investment advisory, administration fees, distribution fees and other Fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The examples assume that you had a $1,000 investment in the Class at the beginning of the reporting period, September 1, 2004, and continued to hold your shares at the end of the reporting period, February 28, 2005. ACTUAL EXPENSES For each Class of each Fund in the table below, the first line provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line of each Class under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of each Class in the table below provides information about hypothetical account values and hypothetical expenses based on the Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Class of the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) or redemption fees. Therefore, the second line for each Class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. The examples also assume all dividends and distributions have been reinvested. 134
EXPENSES PAID BEGINNING ENDING DURING PERIOD ACCOUNT VALUE, ACCOUNT VALUE, SEPTEMBER 1 TO ANNUALIZED SEPTEMBER 1, 2004 FEBRUARY 28, 2005 FEBRUARY 28, 2005* EXPENSE RATIO - --------------------------------------------------------------------------------------------------------------------- BOND FUND CLASS A Actual period return $ 1,000 $ 1,025 $ 3.72 0.74% Hypothetical $ 1,000 $ 1,021 $ 3.71 0.74% CLASS B Actual period return $ 1,000 $ 1,021 $ 7.47 1.49% Hypothetical $ 1,000 $ 1,018 $ 7.45 1.49% CLASS C Actual period return $ 1,000 $ 1,021 $ 7.47 1.49% Hypothetical $ 1,000 $ 1,018 $ 7.45 1.49% INSTITUTIONAL Actual period return $ 1,000 $ 1,027 $ 2.46 0.49% Hypothetical $ 1,000 $ 1,023 $ 2.46 0.49% SELECT Actual period return $ 1,000 $ 1,025 $ 3.36 0.67% Hypothetical $ 1,000 $ 1,022 $ 3.36 0.67% ULTRA Actual period return $ 1,000 $ 1,027 $ 2.01 0.40% Hypothetical $ 1,000 $ 1,023 $ 2.01 0.40% ENHANCED INCOME FUND INSTITUTIONAL Actual period return $ 1,000 $ 1,010 $ 1.00 0.20% Hypothetical $ 1,000 $ 1,024 $ 1.00 0.20% EMERGING MARKETS DEBT FUND SELECT Actual period return $ 1,000 $ 1,113 $ 6.55 1.25% Hypothetical $ 1,000 $ 1,019 $ 6.26 1.25%
135
EXPENSES PAID BEGINNING ENDING DURING PERIOD ACCOUNT VALUE, ACCOUNT VALUE, SEPTEMBER 1 TO ANNUALIZED SEPTEMBER 1, 2004 FEBRUARY 28, 2005 FEBRUARY 28, 2005* EXPENSE RATIO - --------------------------------------------------------------------------------------------------------------------- GLOBAL STRATEGIC INCOME FUND CLASS A Actual period return $ 1,000 $ 1,037 $ 6.16 1.22% Hypothetical $ 1,000 $ 1,019 $ 6.11 1.22% CLASS B Actual period return $ 1,000 $ 1,036 $ 8.33 1.65% Hypothetical $ 1,000 $ 1,017 $ 8.25 1.65% CLASS C Actual period return $ 1,000 $ 1,036 $ 8.33 1.65% Hypothetical $ 1,000 $ 1,017 $ 8.25 1.65% INSTITUTIONAL Actual period return $ 1,000 $ 1,039 $ 3.29 0.65% Hypothetical $ 1,000 $ 1,022 $ 3.26 0.65% SELECT Actual period return $ 1,000 $ 1,038 $ 5.00 0.99% Hypothetical $ 1,000 $ 1,020 $ 4.96 0.99% CLASS M Actual period return $ 1,000 $ 1,036 $ 7.32 1.45% Hypothetical $ 1,000 $ 1,018 $ 7.25 1.45% SHORT TERM BOND FUND CLASS A Actual period return $ 1,000 $ 1,001 $ 3.72 0.75% Hypothetical $ 1,000 $ 1,021 $ 3.76 0.75% INSTITUTIONAL Actual period return $ 1,000 $ 1,004 $ 1.49 0.30% Hypothetical $ 1,000 $ 1,024 $ 1.51 0.30% SELECT Actual period return $ 1,000 $ 1,003 $ 2.88 0.58% Hypothetical $ 1,000 $ 1,022 $ 2.91 0.58%
136
EXPENSES PAID BEGINNING ENDING DURING PERIOD ACCOUNT VALUE, ACCOUNT VALUE, SEPTEMBER 1 TO ANNUALIZED SEPTEMBER 1, 2004 FEBRUARY 28, 2005 FEBRUARY 28, 2005* EXPENSE RATIO - --------------------------------------------------------------------------------------------------------------------- SHORT TERM BOND FUND II CLASS A Actual period return $ 1,000 $ 999 $ 3.72 0.75% Hypothetical $ 1,000 $ 1,021 $ 3.76 0.75% CLASS M Actual period return $ 1,000 $ 998 $ 4.90 0.99% Hypothetical $ 1,000 $ 1,020 $ 4.96 0.99% SELECT Actual period return $ 1,000 $ 1,002 $ 2.48 0.50% Hypothetical $ 1,000 $ 1,023 $ 2.51 0.50%
* Expenses are equal to the class' annualized expense ratio in the table above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 137 THIS PAGE IS INTENTIONALLY LEFT BLANK THIS PAGE IS INTENTIONALLY LEFT BLANK THIS PAGE IS INTENTIONALLY LEFT BLANK JPMorgan Funds are distributed by JPMorgan Distribution Services, Inc. Affiliates of JPMorgan Chase & Co. receive fees for providing various services to the funds. This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by a prospectus. CONTACT JPMORGAN FUNDS DISTRIBUTION SERVICES AT 1-800-480-4111 FOR A FUND PROSPECTUS. YOU CAN ALSO VISIT US AT www.jpmorganfunds.com. INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES AND RISK AS WELL AS CHARGES AND EXPENSES OF THE MUTUAL FUND BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION ABOUT THE MUTUAL FUND. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. No sooner than 30 days after the end of each month, each Fund will make available upon request a complete uncertified schedule of its portfolio holdings as of the last day of that month. Not later than 60 days after the end of each fiscal quarter, each Fund will make available a complete schedule of its portfolio holdings as of the last day of that quarter, as filed in a certified filing with the SEC. In addition to providing hard copies upon request, each Fund will post these quarterly schedules on the Fund's website at www.jpmorganfunds.com and on the SEC's website at www.sec.gov. Shareholders may request portfolio holdings schedules at no charge by calling 1-800-480-4111. A description of each Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is available in the Statement of Additional Information. A copy of proxy policies and procedures are available without charge upon request by calling 1-800-480-4111 and on the Commission's website at www.sec.gov. The Trustees have delegated the authority to vote proxies for securities owned by each Fund to JPMIM. A copy of each Fund's voting record for the 12-month period ended June 30, 2004 is available on the SEC's website at www.sec.gov or at the Fund's website at www.jpmorgan.com. Each Fund's proxy voting record will include, among other things, a brief description of the matter voted on for each portfolio security, and will state how each vote was cast, for example, for or against the proposal. JPMorgan Funds Fulfillment Center PRSRT STD 6112 W. 73rd Street U.S. POSTAGE Bedford Park, IL 60638 PAID PERMIT 2891 KANSAS CITY, MO (C) J.P. Morgan Chase & Co., 2005 All rights reserved. February 2005. SAN-INC-205 ITEM 2. CODE OF ETHICS. Disclose whether, as of the end of the period covered by the report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, explain why it has not done so. NOT APPLICABLE - ONLY FOR ANNUAL REPORTS. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a) (1) Disclose that the registrant's board of directors has determined that the registrant either: (i) Has at least one audit committee financial expert serving on its audit committee; or (ii) Does not have an audit committee financial expert serving on its audit committee. (2) If the registrant provides the disclosure required by paragraph (a)(1)(i) of this Item, it must disclose the name of the audit committee financial expert and whether that person is "independent." In order to be considered "independent" for purposes of this Item, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (i) Accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer; or (ii) Be an "interested person" of the investment company as defined in Section 2(a)(19) of the Act (15 U.S.C. 80a- 2(a)(19)). (3) If the registrant provides the disclosure required by paragraph (a)(1)(ii) of this Item, it must explain why it does not have an audit committee financial expert. NOT APPLICABLE - ONLY FOR ANNUAL REPORTS. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Disclose, under the caption AUDIT FEES, the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (c) Disclose, under the caption TAX FEES, the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (e) (1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. (2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. (g) Disclose the aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant. (h) Disclose whether the registrant's audit committee of the board of directors has considered whether the provision of nonaudit services that were rendered to the registrant's investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. NOT APPLICABLE - ONLY FOR ANNUAL REPORTS. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. (a) If the registrant is a listed issuer as defined in Rule 10A-3 under the Exchange Act (17CFR 240.10A-3), state whether or not the registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). If the registrant has such a committee, however designated, identify each committee member. If the entire board of directors is acting as the registrant's audit committee as specified in Section 3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)), so state. (b) If applicable, provide the disclosure required by Rule 10A-3(d) under the Exchange Act (17CFR 240.10A-3(d)) regarding an exemption from the listing standards for all audit committees. NOT APPLICABLE. ITEM 6. SCHEDULE OF INVESTMENTS. File Schedule I - Investments in securities of unaffiliated issuers as of the close of the reporting period as set forth in Section 210.12-12 of Regulation S-X, unless the schedule is included as part of the report to shareholders filed under Item 1 of this Form. NOT APPLICABLE. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. A closed-end management investment company that is filing an annual report on this Form N-CSR must, unless it invests exclusively in non-voting securities, describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities, including the procedures that the company uses when a vote presents a conflict between the interests of its shareholders, on the one hand, and those of the company's investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules thereunder) of the company, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the company's investment adviser, or any other third party, that the company uses, or that are used on the company's behalf, to determine how to vote proxies relating to portfolio securities. NOT APPLICABLE. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. NOT APPLICABLE. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. (a) If the registrant is a closed-end management investment company, provide the information specified in paragraph (b) of this Item with respect to any purchase made by or on behalf of the registrant or any "affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Exchange Act (17 CFR 240.10b-18(a)(3)), of shares or other units of any class of the registrant's equity securities that is registered by the registrant pursuant to Section 12 of the Exchange Act (15 U.S.C. 781). NOT APPLICABLE. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Describe any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item. NOT APPLICABLE. ITEM 11. CONTROLS AND PROCEDURES. (a) Disclose the conclusions of the registrant's principal executive and principal financial officers, or persons performing similar functions, regarding the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)). THE REGISTRANT'S PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICERS HAVE CONCLUDED, BASED ON THEIR EVALUATION OF THE REGISTRANT'S DISCLOSURE CONTROLS AND PROCEDURES AS OF A DATE WITHIN 90 DAYS OF THE FILING DATE OF THIS REPORT, THAT THE REGISTRANT'S DISCLOSURE CONTROLS AND PROCEDURES ARE REASONABLY DESIGNED TO ENSURE THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE REGISTRANT ON FORM N-CSR IS RECORDED, PROCESSED, SUMMARIZED AND REPORTED WITHIN THE REQUIRED TIME PERIODS AND THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE REGISTRANT IN THE REPORTS THAT IT FILES OR SUBMITS ON FORM N-CSR IS ACCUMULATED AND COMMUNICATED TO THE REGISTRANT'S MANAGEMENT, INCLUDING ITS PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICERS, AS APPROPRIATE TO ALLOW TIMELY DECISIONS REGARDING REQUIRED DISCLOSURE. (b) Disclose any change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. EFFECTIVE FEBRUARY 19, 2005, THE REGISTRANT CHANGED ITS ADMINISTRATOR FROM JPMORGAN CHASE BANK TO JPMORGAN FUNDS MANAGEMENT, INC. THE ADMINISTRATOR PREPARES FINANCIAL REPORTS AND ADMINISTRATIVE FILINGS ON BEHALF OF THE REGISTRANT. ALL PRE-EXISTING POLICIES AND PROCEDURES REMAIN SUBSTANTIALLY THE SAME. ITEM 12. EXHIBITS. (a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit. NOT APPLICABLE. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2). CERTIFICATIONS PURSUANT TO RULE 30a-2(a) UNDER THE INVESTMENT COMPANY ACT OF 1940 ARE ATTACHED HERETO. (a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. NOT APPLICABLE. (b) A separate or combined certification for each principal executive officer and principal officer of the registrant as required by Rule 30a-2(b) under the Act of 1940. CERTIFICATIONS PURSUANT TO RULE 30a-2(b) UNDER THE INVESTMENT COMPANY ACT OF 1940 ARE ATTACHED HERETO. SIGNATURES [See General Instruction F] Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) J.P. Morgan Mutual Fund Group ------------------------------------------------------------------- By (Signature and Title)* /s/ George C. W. Gatch ------------------------------------------------------- George C.W. Gatch, President Date May 9, 2005 ---------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Stephanie J. Dorsey ------------------------------------------------------- Stephanie J. Dorsey, Treasurer Date May 9, 2005 ---------------------------------------------------------------------------- By (Signature and Title)* /s/ George C.W. Gatch ------------------------------------------------------- George C.W. Gatch, President Date May 9, 2005 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. - -------------------------------------------------------------------------------- EX-99.CERT 2 a2156996zex-99_cert.txt EX-99.CERT Exhibit 99.CERT CERTIFICATION PURSUANT TO RULE 30a-2(a) UNDER THE INVESTMENT COMPANY ACT OF 1940 I, George C.W. Gatch, certify that: 1. I have reviewed this report on Form N-CSR of J.P. Morgan Mutual Fund Group (the "Registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the Registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer(s) and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. /s/ George C.W. Gatch - ------------------------- George C.W. Gatch President May 9, 2005 - --------------- Date CERTIFICATION PURSUANT TO RULE 30a-2(a) UNDER THE INVESTMENT COMPANY ACT OF 1940 I, Stephanie J. Dorsey, certify that: 1. I have reviewed this report on Form N-CSR of J.P. Morgan Mutual Fund Group (the "Registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the Registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer(s) and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. /s/ Stephanie J. Dorsey - ------------------------- Stephanie J. Dorsey Treasurer May 9, 2005 - --------------- Date EX-99.906CERT 3 a2156996zex-99_906cert.txt EX-99.906CERT Exhibit 99.906CERT CERTIFICATION PURSUANT TO RULE 30a-2(b) UNDER THE INVESTMENT COMPANY ACT OF 1940 This certification is provided pursuant to Rule 30a-2(b) under the Investment Company Act of 1940, and accompanies the report on Form N-CSR furnished to the Securities and Exchange Commission on the date hereof the J.P. Morgan Mutual Fund Group (the "Registrant"). I, George C.W. Gatch, certify that: 1. The Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of the operations of the Registrant. /s/ George C.W. Gatch - ------------------------- George C.W. Gatch President May 9, 2005 - --------------- Date This certificate is furnished pursuant to the requirements of Form N-CSR and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934. CERTIFICATION PURSUANT TO RULE 30a-2(b) UNDER THE INVESTMENT COMPANY ACT OF 1940 This certification is provided pursuant to Rule 30a-2(b) under the Investment Company Act of 1940, and accompanies the report on Form N-CSR furnished to the Securities and Exchange Commission on the date hereof the J.P. Morgan Mutual Fund Group (the "Registrant"). I, Stephanie J. Dorsey, certify that: 1. The Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. /s/ Stephanie J. Dorsey - ------------------------- Stephanie J. Dorsey Treasurer May 9, 2005 - --------------- Date This certificate is furnished pursuant to the requirements of Form N-CSR and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934. -----END PRIVACY-ENHANCED MESSAGE-----